Cities and villages in Wisconsin rely more heavily on property taxes than any other state in the Midwest, and to a greater degree than most states nationally, according to a new report by the Wisconsin Policy Forum, a nonpartisan, independent research organization.

In 2015, Wisconsin municipalities received 42.2 percent of their revenue from the property tax, but only 1.6 percent from sales and income taxes combined, the Forum noted.

Nationally, on average, municipalities got 23.3 percent of their revenues from property taxes with an additional 21.3 percent from sales and income taxes.

The increased dependence on the property tax is the result, in part, of state aid failing to keep pace with inflation, according to the report. From 1975 to 1997, state aid provided a larger share of municipal revenue in Wisconsin than property taxes. Since then, the situation has reversed, with property taxes in 2015 accounting for more than twice as much of local revenue as state aids.

At the same time, the state has imposed limits on how much municipalities may raise property taxes annually to support their operations; those limits have allowed no increases except for property value increases due to new construction. In the decade before these limits took effect, municipal property taxes rose an average of 5.7 percent annually, but in the following decade the average increase fell to 3.4 percent annually.

The report notes Wisconsin's property tax limits appear to be the most restrictive among states that also depend heavily on this tax.

Four of the 10 most property tax-dependent states have no limits on increases, while the other five allow for increases that would typically be greater than those permitted here.

The report, "Dollars and Sense: Is it time for a new municipal financing framework in Wisconsin?" examines trends in municipal finance, compares Wisconsin's municipal funding structures to other Midwest states and the nation, and provides insights on alternative financing options.

Other states tend to rely on a broader combination of revenues, including local sales taxes, local income or license taxes, charges for services and federal aids. In Wisconsin, state law allows only the state to levy an income tax and reserves the sales tax for the state, counties and a limited number of municipalities that qualify as "premier resort areas."

Among the 12 Midwest states - Wisconsin, Illinois, Iowa, Indiana, Minnesota, Michigan, Kansas, Nebraska, North Dakota, South Dakota, Missouri and Ohio - the report notes that:

• Only Illinois and North Dakota rely more heavily on state aid and less on charges to fund municipalities;

• Wisconsin is the only state in which municipalities generally are authorized to levy only the property tax. In all other states in the region, some municipalities can levy at least one other broad tax;

• Wisconsin is the only state in the region in which property taxes represent the largest share of municipal revenue. In seven states, charges for services are the primary revenue source.

• Wisconsin has the lowest combined state and local sales tax rate in the region, with an average of 5.44 percent. The combined rate in Michigan, the next-lowest state, is 6 percent, while the rate is still higher in Kansas at 8.68 percent.

The report does not recommend any specific course of action, but lays out several options for policymakers and weighs the advantages and disadvantages of each.

The research was commissioned by the League of Wisconsin Municipalities, Wisconsin Association of Realtors and the Greater Milwaukee Committee.

The complete report can be found at wispolicyforum.org.