Is there a sales tax increase in Wisconsin’s future?
Wisconsin first enacted a 3% selective sales tax in 1961. In 1969 it was raised to 4% and changed from a selective to a general sales tax. It was raised to the current 5% in 1982.
The primary source of revenue for state and local government is sales tax, income tax, property tax and redistribution of federal taxes to the states. With a sluggish economy dampening income tax growth, tax payers’ loss of home value and a huge federal deficit, a discussion of the sales tax is most likely on the horizon.
Thirty states have sales tax rates higher than Wisconsin, including our border states;
Revenues from the sales tax have increased an average of just 1.5% per year since 2000.
Since the current legislature is against any tax increase, broadening the tax base might lead the discussion. This could mean eliminating exemptions for purchases of prescription drugs, food for home consumption or other currently exempted items. It may also include a look at Services.
In the 1960’s the sales of “Goods” was 52% of U.S. consumption and the largest part of the sales tax base. Today “Goods” are only 33% of consumption and “Services” are 67% with many not taxed. The Federation of Tax Administrators identified 168 different services and Wisconsin taxes 76 of these services.
Also, Internet sales will continue to be scrutinized. The Department of Revenue estimates that about $62 million (1.4%) of sales tax revenue is lost to e-commerce. Currently 18 of the 20 largest national retailers collect Wisconsin sales tax.
Private sector job loss; Federal government gain
Job growth is the number one priority to increase economic activity, improve the housing market and reduce government spending. Growth in the private sector is most important since it increases tax revenues versus requiring tax revenues to pay government employees.
Unfortunately the job loss has been primarily in the private sector and it looks like a long road to recovery. After the 9/11 disaster there was a recession and employment hit a low in 2003. A four year recovery ensued and peak employment was reached in 2007. Since then the private sector has lost most of the jobs. Following is a recap of the private sector and public sector employment numbers:
YearPrivate Public Total
2003 108.4 m 21.6 m 130.0 m
2007 115.4 m 22.2 m 137.6 m
2011 109.3 m 22.1 m 131.4 m
98.2% of loss was private sector
A further breakdown of the public sector shows federal employment increasing while state and local municipality employment slightly decreased.
YearFederal State/Local Total
2003 2.761 m 18.822 m 21.583 m
2007 2.734 m 19.484 m 22.218 m
2011 2.858 m 19.247 m 22.105 m
4.5% increase in federal employment
With this increase in federal employees, is there any wonder why an abundance of new regulations and policies continue to be enacted, with many hindering private sector employment.
Street Light Elimination
Part of the approved City of Racine Budget for 2012 called for the elimination of 10% of the street lights that are currently leased from WE Energies. The city leases over 4,800 lights from the utility. The elimination of ten percent of the lights equates to a savings of approximately $80,000 annually.
Leased lights have become an unsustainable portion of the street lighting budget, due to the increased operating costs by WE Energies and the fact that the city cannot direct the utility to install energy efficient lighting to lower costs. For identification purposes; leased street lights are those on wooden poles throughout the city.
In addition to the leased lights, the City also owns and operates over 3,300 street lights. These are the lights that are not on wood poles, but are on concrete or metal poles owned by the city. The city has re-lamped nearly 60% of city owned street lights with energy efficient LED lighting to lower annual utility and material costs by 40% for these street light fixtures. No city owned light will be eliminated.
Overall, the reduction in street lighting is less than 6%. The selection process was based off of roadway geometrics, spacing, trees and age and condition of the light. WE Energies is currently in the process of eliminating the selected lights. The Utility will not be relocating lights to even out spacing or replacing lights with a higher wattage bulb.
April 3, 2012 Elections
In the city there are two Aldermanic races: Eric Marcus, outspoken critic of City Hall spending, is being challenged by Krystyna Sarrazin in the soth side 2nd district. Jim Kaplan of the near north side 4th district is challenged by avowed progressive Sherrie Lawson.
The three incumbent school board members face challengers Roger Pfost, Brian Dey and Scott Brownell. The challengers support school choice and better money management procedures.
There are county supervisor contests in the Villages of Waterford and Sturtevant and a judgeship for Racine County.
Elections Have Consequences - Please Vote
Mortgage Refinancing favors worst offenders
The federal government has approved an agreement with 5 banks to provide another $25 billion for a third housing industry refinancing program. This is in addition to the $125-225 billion losses at Fannie Mae and Freddy Mac that taxpayers are currently funding.
These funds are once again skewed to the 4 states that were the primary cause of the problem. Following is the distribution of the $25 billion:
California $ 12.0 bil
Florida $ 8.4 bil
Arizona $ 1.6 bil
Nevada $ 1.5 bil
4 State Total $23.5 bil
All Others $ 1.5 bil
Wisconsin $ 140 mil
From 2000 to 2007 the housing market in these four states outperformed the rest of the nation. This led to more sales, higher prices, more 2nd mortgages, more home equity loans and more money for people to spend. The result was more sales tax, income tax and property tax revenue for these states and local governments.
Now that the increased revenues are gone and the party is over, the rest of the nation must pick up the tab. Redistribution in action.
Wisconsin home sales slightly increased in 2011. Reported sales were 51,512 vs. 51,392 in year 2010. The median sales price was $132,000, a 6.4% decrease from 2010.
The Racine City Council has taken the first step towards providing an animal control facility. The following resolution was passed in February:
Resolved, that the Mayor and City Clerk are authorized to enter into a contract agreement to retain Engberg-Anderson for architectural design services for a City Animal Control facility for an amount not to exceed $10,000 for the first three phases.
It would seem that a business plan should be in place prior to needing an architectural design of the facility. What is the estimated volume of animals for the facility? What services will be offered and what fees will be charged? Will it operate with private funds or tax dollars? Will the employees be private sector or public?