Sales tax increase would slow economic recovery

Milwaukee Business Journal
Feb 19, 2021

Raising any tax during an economic downturn is simply a bad idea. And raising the sales tax when lower income individuals and retailers have been disproportionately harmed by COVID-19 is an even worse idea. Unfortunately, that is exactly what Gov. Tony Evers proposed recently.

Currently, Wisconsin’s state sales tax is five percent and counties have the authority to increase it by 0.5 percent. Evers’ proposal would allow counties and municipalities with populations of 30,000 or more to raise their sales tax an additional 0.5 percent each with voter approval.

Evers says he is doing this because of the “immense budgetary pressure” local governments are under due to COVID-19 and a lack of state aid, but that is simply not the case.

While state and local revenue projections initially plummeted at the beginning of the pandemic, by the end of 2020 local government tax receipts have generally returned to their pre-pandemic levels, according to a report from the Center for Research on the Wisconsin Economy. Further, the federal government has already allocated $400 billion of taxpayer dollars to state and local governments through COVID-19 related stimulus and is poised to allocate hundreds of billions of additional dollars through President Joe Biden’s American Rescue Plan.

In addition to all the federal support, Evers’ first budget was a boon for local governments, giving them generous increases in state aid, according to the MacIver Institute. With revenues rebounding, and historic amounts of federal aid flowing, it is the residents and small businesses in our communities that are hurting, not their governments.

According to the Tax Foundation, Wisconsin is already a high-tax state with the sixth highest property taxes and 11th highest individual income taxes in the country. Local governments can raise property taxes above the levy limit by referendum. They do not need yet another way to raise their residents’ already high taxes.

The real problem is that Wisconsin has too much government. For example, according to Governing, Wisconsin has almost as many local units of governments as New York—3,096 and 3,450, respectively—with less than one third the population.

Rather than take the easy way out and continue to hike taxes on their residents, local governments should work proactively to find efficiencies and eliminate redundant and unnecessary costs and services.

Kurt Bauer is president & CEO of Wisconsin Manufacturers & Commerce.

Read the full article at: