Rethinking Personal Property Tax

The state’s slow-growing economy and aging population suggest Wisconsin will need to re-examine outdated aspects of its tax system, including the personal property tax, an expert on state finances and taxes recently told a special study committee at the state capitol.

Before statehood, virtually all land, buildings and personal possessions in Wisconsin were subject to property taxation. But after more than 150 years of accumulating exemptions, the personal property tax is now a shadow of what it once was, Todd Berry, president of the Wisconsin Taxpayers Alliance (WISTAX) told the Special Legislative Council Steering Committee for Personal Property Tax.

WISTAX is an 82-year-old nonpartisan, nonprofit organization dedicated to research and citizen education.

Today, the personal property tax covers a smattering of items, such as furniture and fixtures, owned largely by businesses. More than anything, it is a tax on retailers and other commercial owners. This year, the personal property tax generates only 2.5 percent of all Wisconsin property tax revenue, Berry said.

“Are we to the point,” Berry asked committee members “where the tax requires too many people to spend too many hours either to pay the tax or collect it?”

The personal property tax is being reviewed by the Special Legislative Council Steering Committee for Personal Property Tax. The committee invited Berry and several other tax experts to update them on the status of the tax. Created by the legislature, the committee is directed to review the personal property tax and report findings to the Joint Legislative Council for possible action when the legislature reconvenes in 2015.

Berry noted that, since the 1830s, Wisconsin has exempted most items from the personal property tax, including bonds, pensions, stocks, clothes, jewelry, books, musical instruments, furniture, tools, crops, vehicles and so on. By the mid-1950s, 97 percent of personal property was exempted – thus shifting the burden to residential and business property owners.

During the past 40 years, the legislature even further eroded the personal property tax base, ending taxation of livestock, business inventories, machinery and equipment, and business computers.

If a “good” tax is efficient and easy to administer; understood and easy to comply with; fair; economically neutral; and accountable to taxpayers, the personal property tax has now been eroded to the point where it may not meet any of these criteria, Berry observed.

“Taxpayers and assessors are both quick to point out that the amount of revenue generated by the tax is almost trivial in relation to the costs of compliance by payers and collection by assessors,” Berry continued.

“If the state moves to provide more property tax relief, it may want to take a hard look at the personal property tax, now little more than a memory of the mid-1800s,” he said.

Berry, Wisconsin’s former assistant secretary of revenue, has been the president of WISTAX since 1994. He has a bachelor’s and doctoral degrees from UW-Madison and master’s degrees from Harvard University and the University of Chicago.

To see or hear the council’s meeting and Berry’s testimony, go to wiseye.org. For more information on WISTAX, go to wistax.org.