Government Affairs | Will Wisconsin Finally Repeal State's Oldest Main Street Tax

WILL WISCONSIN FINALLY REPEAL STATE’S OLDEST MAIN STREET TAX?

The stage has been set in ongoing state budget deliberations for Wisconsin lawmakers and the Evers Administration to support repealing one of our state’s oldest Main Street business taxes known as the Personal Property Tax (PPT). The Legislature is scheduled to vote to repeal the tax and send a bill to the Governor for his signature, but Gov. Evers has not indicated if he will sign the bill.

A combination of a Second District Court of Appeals decision and a recent revelation that the state will end its fiscal year with an “unprecedented” surplus in revenues from tax collections makes a very compelling case that the Legislature may vote to finally put an end to this outdated, small business tax. IIAW has prioritized on behalf of its membership advocating for the outright repeal of the PPT. In 2015, IIAW teamed up with multiple other statewide organizations, now at 49 members, to form an advocacy group called the Coalition to Repeal the Personal Property Tax. The coalition is represented by nearly every business sector in the state with the sole purpose to end the PPT.

Wisconsin’s personal property tax is one of our state’s oldest taxes and has been a part of the general property tax code since Wisconsin became a state in 1848. Early on, the PPT included taxes on everything everyone owned or used. However, over the many years of its existence most kinds of personal property have been exempted including personal household possessions, certain farm and manufacturing property, and property owned and used by a growing list of carved out organizations such as the YMCA, fraternal societies and hospitals to name a few. Under current law, personal property includes all goods, wares, merchandise, chattels and effects of any nature or description having any mercantile value and not included in the term “real property”, excluding personal possessions reserved for personal use. For purposes of the business personal property tax, this includes the actual physical items used in the daily operation of a business, including furniture, fixtures, machinery, equipment, electronics, leased equipment, supplies, signs, boats and all remodeling costs not paid for by a landlord. Over the lifespan of the PPT, the Legislature created a myriad of exemptions that have resulted in nonuniformity, frequent tax audits and costly litigation, especially for smaller employers. Certain businesses are subject to paying the tax and others are not, as well as some kinds of equipment are taxed in one municipality, but not in another. For many Main Street businesses, complying with the recordkeeping costs associated with the tax can be more expensive than the tax itself. And all of Wisconsin’s neighboring states such as Minnesota, Iowa, Illinois and Michigan have repealed their personal property tax laws.

The Second District Court of Appeals ruled recently that taxpayers must go to the Wisconsin Tax Appeals Commission before bringing a challenge to a state court alleging the state Department of Revenue (DOR) has issued an unpromulgated rule. The underlying issues in the lawsuit, Wisconsin Property Tax Consultants & WMC v. Department of Revenue, are whether the DOR’s interpretation of the personal property tax exemption on machinery, tools, and patterns,

conflicts with state law and whether the agency has implemented this interpretation without going through the proper administrative rulemaking process. The effect of the court’s decision, which is likely to be appealed to the state Supreme Court, forces taxpayers to incur additional costs and time when seeking to challenge unlawful actions and interpretation by the DOR. The overly burdensome nature of the personal property tax, exemplified by the agency’s actions that led to this particular case, is another reason the tax should be repealed in its entirety.

Then there’s the latest political news from several weeks ago that Wisconsin will realize an additional $4.4 billion in revenues in the current fiscal year. One major reason why the Legislature hasn’t repealed the tax up until now is because of the significant cost in doing so. Now legislative leaders are calling for using the extra revenues to return these dollars back to taxpayers and prioritizing repeal of the PPT should be at the top of the list for state budget consideration. The coalition has voiced its support for the state fully reimbursing local municipalities for any lost revenue from repealing the tax, which would then allow municipalities to be held harmless without having to administer and collect the PPT. Wisconsin municipalities would benefit by not having to assess businesses, employers would benefit by not having to pay the tax anymore, and citizens would benefit from the additional revenue that employers could instead put toward their workforce and business.

Repealing the personal property tax is not a partisan issue. IIAW and the coalition are asking members of the Legislature and Governor Evers to work together in a bipartisan manner to fully repeal the personal property tax once and for all.

> Misha Lee

IIAW Lobbyist