A tax expert says the maneuver a committee used to maximize Sauk County’s proposed tax collections next year is legal, but not ideal budget behavior.
“The state and its poorly crafted law encourages this behavior,” said Wisconsin Taxpayer Alliance President Todd Berry. “The county shares responsibility for levying money it did not need to levy.”
On Oct. 10, after weeks of discussions, the Sauk County Board’s Finance Committee worked out a 2018 budget plan that balanced revenues and expenses.
However, there was one thing the committee didn’t like: The budget proposal did not raise property taxes by the maximum amount allowed under state law.
Committee members knew that state-imposed limits would permit the county to increase what was then a $30.8 million property tax levy by an additional $224,342.
So the committee voted 4-0 to use that additional capacity, and increase the proposed tax levy to $31 million. In order to balance out that move, the committee arbitrarily lowered the county’s sales tax revenue projection by $224,342.
Committee members did not say they actually expected less sales tax revenue next year. The lowered revenue projection was simply a mechanism to justify the increase to the tax levy.
The committee’s proposed $90 million county budget — which requires $31 million from local property taxes — will be considered for adoption by the full board following a public hearing Nov. 14.
Transparency versus stability
Berry said although the state-imposed levy limits are intended to force towns, villages, cities and counties to hold the line on property taxes, they actually encourage the opposite.
Each year’s levy establishes a new baseline under the law. So if local governments don’t take the maximum increase allowed, they lose most of that unused capacity in the following year. That creates a perverse incentive to “use it or lose it.”
Berry called the Sauk County committee’s maneuver a budget “trick” that is legal, but not exactly transparent or ideal behavior.
“One cannot call it transparent in a way that promotes public understanding of county financial practices,” Berry said, adding that state lawmakers are guilty of much larger budget trickery.
Although there are certain exceptions, the state law generally limits levy increases to the percentage growth in equalized value from net new construction during the prior year.
For example, if a county’s net new construction was 4 percent, the property tax levy may be increased by no more than 4 percent. If no new construction occurred, taxes cannot be raised.
Sauk County Controller Kerry Beghin said the county has experienced a sluggish recovery in property values and new construction, and collecting the maximum property tax levy tempers that trend.
She also said maximizing the levy helps alleviate budget uncertainties that result from ever-changing state and federal program mandates and funding levels.
Lowering the sales tax projection is reasonable, Beghin said, because it is a volatile revenue source.
“Sauk County has enjoyed a strong financial position by budgeting conservatively and looking to the future,” Beghin said. “Positioning for the future during volatile times protects taxpayers by increasing stability.”
One board member wants to reverse the committee’s decision, saying the county’s sales tax projection should be based on real expectations, not modified in order to affect other budget lines.
Nathan Johnson of La Valle has proposed an amendment that would return the sales tax projection to its original amount and thereby lower property taxes by $225,000.
“The fact that the State of Wisconsin has imposed restrictive limits on tax levies should not be used as an excuse for Sauk County to exploit its taxpayers by taxing them twice,” Johnson wrote in his proposed amendment.
The committee is slated to make recommendations on proposed budget amendments during a meeting Monday morning. And the full board will have the final say during its Nov. 14 annual budget meeting.
Although local government officials have long criticized the state’s levy restrictions, there is little political will in Madison to eliminate what’s sometimes referred to as the “tax to the max” incentive.
One lawmaker says the state shouldn’t try to control local budgets through convoluted laws. Rep. Dave Considine, D-Baraboo, said communities that don’t like the property tax increases they are seeing already have a way of resolving the problem: Local elections.
“I would like us to allow local forms of government to be responsive to their own electors and not have the state dictate it all,” Considine said. “It’s almost an insult to the voters of our state, like saying you don’t know what you’re doing.”