Public Policy Forum
Legislative Republicans Roll the Dice
by Joe Murray
With their proposal to limit local property taxes for three years, legislative Republicans have apparently decided that voters will reward them for their frugality by increasing the size of their current majority in next year's elections.
Republican legislators want to put a "freeze" on local property taxes for the next three years to ensure that governor Jim Doyle's "no new taxes" state budget doesn't result in huge local property tax increases.
Background
On February 18, Governor Jim Doyle presented his "no new taxes" budget to the Republican-controlled Legislature. For the most part, Doyle's budget did avoid any tax increases to the state's income, sales or corporate tax structure.
But the Doyle budget left one potential and politically significant tax hike on the table: local property taxes.
During his successful run for governor in 2002, candidate Doyle pledged to avoid tax increases, including property taxes, by funding state school aids and shared revenues to local governments to avoid cuts in local services and increases in local property taxes.
But Governor Doyle's first budget reduced state shared revenue by $70 million and reduced the percent of state support for local schools from 66 percent to 63 percent. These cuts in local aids virtually guarantee a sizable property tax hike in December 2003.
According to the non-partisan Legislative Fiscal Bureau (the Legislature's budget office), local property taxes could increase by 9.5 percent this year alone. It's difficult to claim a no-tax-increase budget at the state level if it results in substantially higher property taxes back home.
GOP Responds
Sensing the opportunity to score political points with voting homeowners, Republicans proposed their "freeze" on property tax levies for three years with an exception to accommodate growth from new construction.
From the GOP perspective, the freeze gave them the political upper hand: no new taxes at the state level and a freeze on property tax levies at the local level to hold the line on property taxes. Assembly Speaker John
Gard said the freeze would help Governor Doyle keep his no new taxes pledge.
Doyle and Locals React
Governor Doyle and most local officials, including the 90,000 member state teachers union, WEAC, have harshly criticized the freeze as a proposal that will "devastate" local schools and make it difficult to fund local government services such as police and fire protection.
Doyle and WEAC estimate a "cut" to local schools of $400 million in lost revenue due to the levy limits. Local governments throughout Wisconsin are quickly passing resolutions to authorize additional bonding to pay for future capital improvements before July 1, when the budget bill, along with the levy freeze, could become law.
Governor Doyle and local officials strongly object to the legislature dictating how much local schools and governments should spend on local services. Assembly Speaker John Gard and Majority Leader Mary Panzer insist on the need to slow local spending and taxes in a time of fiscal crisis at the state level. Gard and Panzer frequently point out that the state sends 60 cents on the dollar back to local governments and schools to fund local services. If the state has a fiscal problem, local units of government must also due their part to eliminate the $3.2 billion deficit and hold the line on taxes and spending back home.
McCallum Repeat?
To some, the Republican freeze proposal is a reminder of the failed McCallum strategy to eliminate shared revenues in 2002. Former Governor McCallum's proposal called for the elimination of revenue sharing in three years, which would have almost eliminated the state's $1.1 billion deficit in January of 2002.
But McCallum's proposal died a painful death in the legislature. Both Republicans and Democrats rejected total elimination of the shared revenue program.
However, the Republican freeze proposal, unlike McCallum's plan, does not call for elimination of revenue sharing with local governments. The freeze holds local government taxing authority to this years level and allows for municipalities to cover their expenses for new construction. Comparing the freeze to McCallum's plan is disingenuous.
Public Supports Freeze
A poll commissioned by the Wisconsin REALTORSŪ Association and others in May shows the public in support of the freeze proposal:
- 64 percent agreed that the principle to "freeze any increases in local property taxes" was either very or extremely important;
- 67 percent agree that Governor Doyle can't call his budget a "no tax increase state budget" if property taxes increase as a result of it;
- 54 percent are most concerned about property tax increases;
- 84 percent of voters said that they would be more likely to support limiting local spending if they knew the state was also limiting its own spending.
Property Tax Endgame
The property tax issue has the potential to swing elections in Wisconsin. Polling shows that two-thirds of the voting public supports a freeze on local property taxes even if it means spending cuts on most local services.
The whole issue of the property tax freeze vs. local government spending will be front and center in next year's elections (as well as the special election in South Milwaukee in July) if Governor Doyle vetoes the freeze.
Legislative Republicans are confident that without a freeze on local taxing authority, property taxes will soar and voters will punish Doyle for breaking his "no tax increase" pledge.
If Doyle signs the freeze, Republicans can take credit for putting the breaks on the most hated tax in Wisconsin. Then they will search for a new issue to campaign on.
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