Plan fails to address reason property taxes keep rising: his own “400-year veto”
Policymakers are scrambling for solutions as Wisconsin property tax burdens continue to rise. As homeowners clamor for relief, Gov. Tony Evers (D) has proposed using $1.3 billion from the state’s surplus to buy down property tax bills. Unfortunately, the proposal does nothing to address the structural drivers of high (and rising) property taxes and, if anything, puts more pressure on them in the future. His proposal commits the state to subsidies that shift burdens rather than alleviate them.
The governor’s plan, revived from his fiscal year 2025-27 budget proposal, contains three main prongs. First, it increases state funding to local school districts beyond their revenue limit authority, reducing the amount school districts collect in property taxes. Second, it offers local governments additional aid, equal to a 3 percent levy increase, if they agree to hold their property tax levies flat. And third, it enhances school levy tax credits, reducing taxpayers’ net liability.
These provisions paper over the problem and create a greater reckoning in future years, temporarily shifting costs to state-level taxes without addressing the drivers of soaring property tax bills.
School districts are subject to revenue limits, so a temporary increase in state aid reduces the amount of local property tax revenue needed to reach those limits, yielding automatic property tax relief in any district at or near its limit (which is virtually all of them). When that additional aid expires after two years, property taxes will snap back to higher levels.
Meanwhile, if local governments freeze levies for two years in exchange for a temporary increase in state aid, they will face a substantial budget hole in year three. Instead of buying down rate reductions, this aid is likely to pad the budgets of jurisdictions with little capacity to generate additional property tax revenue in the first place.
Unlike school districts, which have overall revenue limits, county and municipal governments are subject to levy limits that allow only growth equal to new construction. In fast-growing communities where new construction would increase collections by more than 3 percent, local governments will have to decide whether the state aid is worth taking.
A local government that could increase collections by 4 percent might, for instance, conclude that it would be more prudent to accept a 3 percent increase if the entire increase were paid out of state funds rather than collected from local taxpayers. If the allowable increase were 5 percent, the jurisdiction might be tempted to decline state aid. Conversely, a community with only 1 percent new construction would jump at the chance of a 3 percent state-funded revenue bump in exchange for freezing the levy. But the aid will run its course in two years, while their spending has adjusted to higher revenue.
This will generate intense pressure to make temporary state aid permanent to avoid a fiscal crunch for localities. If made permanent, the result is a net tax increase, just under different taxes: Given the incentive structure, the state aid is likely to be larger than the amount of local property tax it offsets. If the aid is allowed to expire, local governments are likely to offer referenda permitting them to exceed their allowable levy limit rather than accept a revenue decline.
Finally, the enhanced tax credit also provides temporary tax relief, but it disguises the true cost of school district taxes and makes it easier for districts to go to voters for additional revenue authority, since the local taxpayer cost of those higher bills is mitigated by state-funded credits. This could be particularly significant if voters approve recurring authority to exceed the revenue limit while experiencing temporarily lower property tax burdens under a credit expansion that runs for only two years.
Ultimately, the governor’s plan fails to reckon with the reason why Wisconsin property taxes keep rising despite school district revenue limits and strict local property tax levy limits: the so-called “400-year veto,” under which the school district revenue limit increases by an additional $325 per student every year until 2425 — a date created by creative use of the veto pen.
Crucially, this is not an increase of $325 per pupil that remains in place for centuries. It is an additional $325 per pupil, on top of all other annual adjustments, every year. For fiscal year 2026, the third year of the adjustment, the allowable limit is $975 higher per pupil than it would be without it ($325 x 3). What was supposed to be two increases totaling $650 per year per student will now continue to compound for over 400 years, which plays a significant role in rising property taxes and is unaddressed by the governor’s proposals. To date, Evers has expressed reluctance to reconsider his veto.
Wisconsin’s rising property tax bills are primarily a school levy issue. County property taxes rose about 2.9 percent last year via new construction and voter overrides. School district levies rose 7.8 percent, and the growing per-pupil revenue limit is a major factor in that increase.
Barring any other increases in state aid to school districts, two more years of $325 annual increases will raise property taxes by about $775 million statewide, slightly more than Evers proposes in offsetting aid across revenue limit buy-downs and additional school levy credits ($375 million each, for $750 million in total). The governor’s school district property tax relief is a state-level taxpayer-funded offset of the next two years of the annual increases he created with his novel veto.
Property taxes are too high, but the solution is to address the mechanisms responsible for their rise, not to paper over them with temporary increases in state aid that shift burdens to less efficient taxes and reduce the likelihood of much-needed income tax rate relief. If policymakers are serious about keeping property tax burdens in check, they should adopt policies that actually constrain property tax growth, rather than using temporary state surpluses to kick the can down the road.
Jared Walczak is a Senior Fellow at the Tax Foundation, where he spent five years as Vice President of State Projects, and president of Walczak Policy Consulting.
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