New Tax = Tax Increase to Fuel More Spending

I can’t resist the pun.

Like a bad penny, the idea of using an increase in the sales tax for funding the schools has returned.    

The idea is not new. In 2007, Wisconsin Way toured the state touting a shift of educational spending from the property tax to the sales tax. The idea had the support of realtors who wanted to find a way to reduce the burden on property owners.  The problem is that when a tax shift is proposed, taxpayers often get the shaft. 

Tom Beebe of the Wisconsin Alliance for Excellent Schools (WAES) is supporting the “A Penny for Kids” idea. It would increase the state sales tax by a full percent to six percent.  

This six percent would not include the additional half percent 63 of Wisconsin’s 72 counties are already charging. It would not include the proposed sales tax increases to cover transportation expenditures under Regional Transit Authorities. It would not include the Brown County sales tax to pay for the Lambeau Field renovation. It would not include the sales tax for Miller Park, including the proposal to expand the sales tax to cover the Bradley Center. It would not include the proposed sales tax for the parks in Milwaukee County. You get the picture. 

The WAES believes the increased sales will generate $850 million for the state’s schools. They are saying the money is needed in light of the state’s decrease in educational aid. However, that decrease was only $147 million.

What the WAES is proposing is a massive tax increase to fuel a massive increase in educational spending. 

The idea is presented as a way to help property taxpayers. However, this has nothing to do with property tax relief. The WAES is committed to the “Wisconsin Adequacy Plan.” According to the WAES, “adequacy” would be determined by looking at what they would define as needed for education, and then trying to figure out how to pay for it. 

So what would “adequacy” cost the taxpayers? “Adequacy,” according to the WAES, would require a 32 percent increase in the total state tax burden.  That’s not just pennies, and does not leave any room for reducing local property taxes. 

Fortunately for taxpayers, Beebe’s proposal comes at a time when the state can ill-afford massive new spending programs with massive new taxes. The idea, supporters concede, is not likely to gain traction in the immediate future. 

It also comes at a time when sales tax collections for the state were down 12.4 percent in 2009. This was the first such decline in sales tax revenue since 2002. While the trend has generally been positive for the state, when sales tax collections are down that means the state would need to draw from general tax revenues: property and income taxes. 

However, taxpayers need to be wary, as the idea of using the sales tax to fund schools has shown more resilience than the Star Wars movie franchise. Previously WAES supported such ideas as taxing hospitals, expanding the sales tax to cover services, and even combined reporting for corporate income tax. Do those ideas sound familiar? When supporters of the increased sales tax say that there is no support for the idea right now, it just means, “not yet.”


By James Wigderson
Special Guest Perspective for the MacIver Institute