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Earlier this month, with an unexpected $100 million biennial budget surplus burning a hole in his pocket, Wisconsin Governor Scott Walker proposed to use the one-time surplus to permanently cut local property taxes. In a whirlwind legislative session, a bipartisan group of Wisconsin lawmakers approved Walker’s tax cut with little opposition. Walker signed it into law over the weekend in a media-friendly event, with a red barn as the backdrop and children as nearby props.
The new law adds $100 million in state aid to local school districts over the next two years—which, due to the state’s strict local revenue limits, means that local governments receiving the new aid will be forced to reduce their property taxes dollar for dollar.
But there’s a hitch. The forecast $100 million surplus may be just a memory two years from now, but the new state aid will be permanently on the books. As the Wisconsin Budget Project (WBP) points out, using a one-time budget surplus to fund a permanent property tax cut is a recipe for long-term fiscal difficulties. Down the road, lawmakers will likely be forced to either hike state taxes or cut other areas of spending to pay for Walker’s tax cut. And “down the road” isn’t that far off: the Legislative Fiscal Bureau is already estimating a budget shortfall of about $725 million for the biennium starting in 2015.
Even worse, the new law will offer trivial tax breaks to homeowners, despite its huge price tag. The typical homeowner will see just $33 in property tax cuts over the next two years and many ordinary homeowners will see no cut at all. This is because the Governor’s plan will cut property taxes across the board, offering tax breaks to big corporations, shopping malls and vacation homes in addition to Wisconsin homeowners who happen to live in the right school districts.
In an attempt to disguise this campaign season ploy as a fiscally responsible plan, defenders of the new law argue that a new deal requiring Amazon.com to collect sales taxes in Wisconsin will help pay for the cut. But the estimated $30 million a year from that deal is not “new revenue,” and it’s already got a purpose—it’s legally-owed sales tax revenue that should already have been helping to fund schools, roads and medical care for years.
One of the few responsible legislators who voted against the tax bill offered some illuminating observations. Noting that it amounts to less than a dollar a month for the average home owner, State Senator Tim Cullen said that this trumpeted “tax relief” was aimed at nothing more than ensuring Governor Walker’s re-election. “That at the end of the day is what this is all about — $100 million of property tax relief. Nice headline.” More specifically, many share the view that the Governor was more interested in scoring political points than promoting good tax policy, and it’s a shame so many members of his legislature willingly played along.