1. Wis. Legislative Council ▪ Personal Property Tax ▪ 07.30.14 Tax reform 2015? Thinking about the personal property tax Todd A. Berry, PhD, President Wisconsin Taxpayers Alliance

2. Wis. Legislative Council ▪ Personal Property Tax ▪ 07.30.14  Why now?  Economic, demographic context  Our tax system; property tax background  Personal property – data and history  Where are we now? What do we do? Why? Overview

3. Wis. Legislative Council ▪ Personal Property Tax ▪ 07.30.14  Lack of systemic reform, accumulating ‘detritus’  Growing need: — Slow-growth state economy — Rapidly evolving population trends — Dated and unbalanced tax system  Recent actions: tinkering and stage-setting  An open window... closing?  And, of course... politics Why reform talk?

4. Wis. Legislative Council ▪ Personal Property Tax ▪ 07.30.14 State economy...

5. Wis. Legislative Council ▪ Personal Property Tax ▪ 07.30.14 Quick review: NE X X CW 2001-12 X +5 to +7% -5 to -6%

6. Wis. Legislative Council ▪ Personal Property Tax ▪ 07.30.14... and population trends + = No workforce growth No job growth, revenue growth

7. Wis. Legislative Council ▪ Personal Property Tax ▪ 07.30.14 Growth or Decline 2015-40 Labor Force Cohort 25-64 dn > 10 up <10 dn <10 up >10

8. Wis. Legislative Council ▪ Personal Property Tax ▪ 07.30.14  Total revenues, state-local  Total taxes, state and local  Relative size  Policy, economic implications of Wis. system Wisconsin taxes—overview State-Local Taxes as Pct. Per. Income (Census – 2011) 1 2 3

9. Wis. Legislative Council ▪ Personal Property Tax ▪ 07.30.14 Tot. property tax: Size & growth Size of Net Levy (line) and Rates of Increase (bars), 1984 - present

10. Wis. Legislative Council ▪ Personal Property Tax ▪ 07.30.14 2013-14 Property taxes, Gross $10.6 billion (net < $9.9b) Property tax: Who uses?

11. Wis. Legislative Council ▪ Personal Property Tax ▪ 07.30.14 UW State property tax relief — major * *

12. Wis. Legislative Council ▪ Personal Property Tax ▪ 07.30.14 ` Relief: Questionable success? 2013/14

13. Wis. Legislative Council ▪ Personal Property Tax ▪ 07.30.14 2013-14 Equalized Values Property tax: Who pays? ResidentialCommercial Manufacturin gAgriculturalOtherTotal Share of Total 70.3%19.0%2.8%0.4%7.5%100.0%  Residential – 70.3%  Commercial – 19.0%  Manufacturing – 2.8  Personal property – 2.5  Agriculture– 0.4  Other – 5.0

14. Wis. Legislative Council ▪ Personal Property Tax ▪ 07.30.14 2013-14 Personal Property Valuation Detail Personal property tax – sources ResidentialCommercial Manufacturin gAgriculturalOtherTotal Share of Total 70.3%19.0%2.8%0.4%7.5%100.0%  Watercraft – $0.016 bill.  Mach. Tools/Patterns– 4.391  Furniture/Fixtures/Eq –5.058  Other– 2.300 Total– 11.762 Note:$7.638 bill. in cities; $1.975 bill. in villages

15. Wis. Legislative Council ▪ Personal Property Tax ▪ 07.30.14 Personal property tax – History  Property tax: Old, a “wealth tax,” the main tax  Wis. in 1830s: Land, buildings, possessions, incl. — clothing, furniture, books, tools ($75 exempt’n) — farm implements and machinery, growing crops — pensions, stocks, jewelry, watches, musical inst. — livestock, wagons, harnesses, sleighs, vehicles — business inventories, mfg. machinery/equipmt.  Chipping away, e.g. 1868 (pensions); 1891 (clothes, books, kitchen furniture, crops, partial furniture; 1911 (stocks/bonds, jewelry, HH furnishings, tools, instruments); 1923 (farm horses, wagons, etc.); 1931 (vehicles); 1937 (hay, grain, feed); 1941 (farm machinery of retailers)... any more!  Mid-50s: 97% personal property exempt

16. Wis. Legislative Council ▪ Personal Property Tax ▪ 07.30.14 More chipping away at tax base  1956: Total repeal urged by committee  1959: Again, Gov. Nelson (D) and Tax Committee  Begin 1960s: Constitution amended to allow non- uniformity for livestock, business stocks/inventories  1961: Half of this “Line A” (above) property exempted  1974: M&E exempted, phased reduction of Line A (Lucey,Conta, Earl – D, Kasten – R)  1977-81: Line A exemption completely phased out  1999: Exemption for bus. computers, software  2003: Cash registers, fax machines added

17. Wis. Legislative Council ▪ Personal Property Tax ▪ 07.30.14 Personal Prop. Taxes as Share of All Property Taxes (LFB) 1970 - 2011 1.9% of 2.7% Pers’l prop. tax today: Comm’l tax?

18. Wis. Legislative Council ▪ Personal Property Tax ▪ 07.30.14  Unbalanced tax system  Property tax: Largest, most unpopular  Personal property tax: ▪ 150 + years of slow death, almost gone by 1950s ▪ More erosion since. Today: Vestigial “tail”?  Property tax relief efforts mixed ▪ 20 th century “buy down” approach unsuccessful? ▪ Now, what should property tax be used FOR? As a ‘user-charge?’ As a ‘local’ tax? Where are we now?

19. Wis. Legislative Council ▪ Personal Property Tax ▪ 07.30.14  Test of a ‘good’ revenue source? ▪ Efficient, easy to administer ▪ Stable, productive ▪ Understood, easy to comply with ▪ Ideally, linked to service produced ▪ Equitable: Who taxed? What taxed? ▪ Economically neutral, nonintrusive ▪ Promotes accountability  Permanent, ‘doable,’ sustainable property tax relief? ▪ State property tax, forestry ▪ Technical college property tax ▪ Personal property tax and the ‘test’ Now, where does that leave us?

20. Wis. Legislative Council ▪ Personal Property Tax ▪ 07.30.14 Thank you! Questions? wistax.org Over 80 years of independent policy research and citizen education.

21. Wis. Legislative Council ▪ Personal Property Tax ▪ 07.30.14