By Roger Parks, Ph.D., Ronald Oakerson, Ph.D.
Throughout the 1980s and into 1990, Wisconsin has labored over the twin issues of property tax relief and the control of state/local spending. The two concerns are interrelated, but differently focused. Effective property tax relief requires local tax restraint; otherwise tax dollars spent for relief may instead finance increases in local budgets. Yet, concern over high property taxes leads to efforts to shift the tax burden away from property taxpayers, while concern over high levels of spending leads to broader efforts aimed at controlling or reducing taxing and spending overall. Although Wisconsin is not alone in these concerns- indeed fiscal issues have been the leading state/local concern of the last two decades–Wisconsin’s experience is, nevertheless, unique, and therefore needs to be understood in its own terms as well as comparatively.
Having made a commitment to local tax-base equalization, alongside a strong desire for productive local governments, Wisconsin finds itself paying a high tax-price for local goods and services, relative to income, while searching repeatedly for property tax relief. Responding to high property taxes, state legislators increase shared revenues and state aids, which in turn stimulate local spending, which in turn generate upward pressures on property taxes. The process is one that feeds on itself. To get out of this self perpetuating cycle, Wisconsin must rethink its basic fiscal institutions, including both local tax and expenditure rules and the structure of state aid formulas.