The state’s levy limit will Sauk Cost county taxpayers no less than $3.3 million over the next 10 years. It’s the tax increase that keeps on giving. Maybe levy limits have met their limit.
Sauk County’s Board of Supervisors fell into the trap of local governance. The supervisors decided not to gamble and took the safe bet. The Board of Supervisors maximized its levy limit — which translates to higher taxes for property owners — in the infamous “use it or lose it” strategy of government spending. It’s honestly not all their fault. The state of Wisconsin forced them into making this decision.
The current law on levy limits, minus a handful of exceptions, basically states the county, like other jurisdictions, only can increase its levy limit by zero percent or the amount of net new construction. By not maximizing the levy limit this year, the county won’t have the money next year when budget time comes around. The theory is based on the idea that just because you don’t need it this year, it doesn’t mean you won’t need it next year.
The county’s decision cost taxpayers $330,000 this year. It’s seems minuscule when the county budget exceeds $90 million. The original proposal of a $224,000 increase proposed by Supervisor Nathan Johnson of Reedsburg also failed during committee meetings. The higher tax levy now becomes part of the base tax, which determines how much the county can increase its levy in the future.
Therein lays the dilemma behind the state law. When predicting the future, county and municipal leaders feel compelled to maximize the levy limit simply because they don’t know if they’ll need that same amount of increased spending in the future. To protect against the future, they’re forced to tax to the maximum so they have the guaranteed revenue next year.
Levy limits were first introduced under Gov. Jim Doyle. In 2009, when his budget cut millions to local and county governments, as well as to school districts, a loophole resulted in the largest shift of tax from the state to local property taxpayers in state history as the law allowed them to make up for the lost state revenue. This tax burden shift occurred in spite of the shovel-ready dollars we received from the President Barack Obama administration.
When Gov. Scott Walker introduced Act 10, he protected the taxpayers from a similar shift of the burden. Walker was in the middle of the same recession and had made comparable cuts as Doyle did. Instead of watching the tax burden shift to the property taxpayers again, Republican lawmakers removed the loophole, in addition to the famous changes to employee benefits.
Here we are more than six years later. The economy is recovering and revenues are increasing. As such, the county is seeing increased revenues in sales tax, a tax designed to lower the property tax burden. The projected revenue for sales tax, according to the Wisconsin Taxpayers Alliance, is $9.2 million. The county originally budgeted $9 million.
To maximize the levy, the county board lowered its sales tax forecast to $8.8 million to balance the budget. Here is where the dilemma lies. Should the economy tank, the increased levy limit looks brilliant. If not, it’s a mandatory $3.3 million tax increase over the next 10 years.
That is what a rainy day fund is supposed to be for — hedging your bets against an economic downturn. The rainy day fund isn’t meant for sunny days.
The current levy limits are similar to the Qualified Economic Offer in the state law prior to 2009. The teachers union argued it protected teachers from low-ball offers by school districts. Taxpayers argued it protected from unjustified wage increases. In effect, it turned into a mandatory wage and tax increase as the unions used it to leverage their contracts to the max.
The QEO and the levy limit law are exactly the same. While one could put forward the argument the rules protected taxpayers, in reality the two laws legalized mandatory tax increases. In the application of protecting taxpayers from large tax property tax increases (or wages rendered) the law guarantees there will at least be a minimum increase for governments units to max out.
Taxpayers should be protected from large and unnecessary tax increases. They also should be protected from unnecessary increases designed to tax for the sake of taxing. It’s time to review the levy limit laws and whether they can be fixed, or maybe they’ve met their limits and should be eliminated.