Gov. Tony Evers wants to give communities with more than 30,000 people the option to increase their local sales tax by a half-cent — if approved by a local referendum.
Evers unveiled the proposal Friday, Feb. 12, saying the increase gives communities across the state more control to make investments in local roads, public safety and public health.
"From the unexpected costs of the COVID-19 pandemic to the years of neglect and underfunding from the state, communities across Wisconsin have been under immense budgetary pressure, and they’ve been doing more with less for far too long," Evers said in a statement.
Wisconsin’s sales tax is 5%. Under current law, counties only have the ability to impose an additional 0.5% tax on the hotel tax.
By comparison, Illinois has a 6.25% sales tax, Minnesota has a 6.875% sales tax and Iowa and Michigan are at 6%.
Evers' announcement was welcome news in Milwaukee County where state and local leaders have been lobbying for a 1% local sales tax increase since 2019.
Democratic lawmakers introduced a bill that would have allowed Milwaukee County municipalities to put a binding referendum on their ballots asking for the increase. But the bill stalled and did not meet the deadline to be put on the April 7, 2020, ballot.
Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce, which represents over 1,600 businesses, said Evers' proposal is a reasonable way to meet the financial needs of municipalities without overburdening taxpayers.
Sheehy recognizes the proposal could be a tough sell for Republican lawmakers, but said he hopes they see it would benefit many.
"I want to thank the governor for the leadership," Sheehy said. "We’re hopeful the Legislature will understand this is a fiscal tool that will help — in our case Milwaukee County and the city of Milwaukee — take care of some of its challenges. This isn’t about asking the state for more money to solve our challenges, it’s simply asking the state to give us a tool to address our challenges locally."
Milwaukee Mayor Tom Barrett said the inclusion of the proposal to increase a sales tax via referenda allows diversification in the city's revenue stream.
"An increased sales tax will reduce our reliance on property taxes which would position our revenue structure closer in alignment with similar size cities," Barrett said in a statement. "It will also offer an opportunity to capture local revenue from tourists and commuters that impose costs on the city, but do not pay property taxes."
According to the Wisconsin Policy Forum, Wisconsin ranks seventh in the nation and first in the Midwest for its reliance on property taxes for funding municipalities.
The proposal will be included in Evers' 2021-2023 biennial budget proposal.
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