A Critical Review of Property Tax Relief in Wisconsin

The State of Wisconsin is currently spending nearly $900 million to fund two property tax relief programs, the school levy credit and the first dollar credit. This paper provides a detailed analysis of these two credits. The results indicate that the credits provide an inefficient means of delivering property tax relief to Wisconsin homeowners and renters for whom the property tax is creating the greatest economic hardships. The author finds that a substantial proportion of the credits go to non-residents, to high-income individuals, and to others not in serious need of property tax relief. The paper concludes with a recommendation that the two credits be phased out and the resulting budgetary savings be used to help finance the reform of education funding and to expand the homestead credit, an existing income tax provision that provides property tax relief to homeowners and renters facing high property tax burdens.

The major findings of the paper are:

• Despite being labeled as “state support” for education, neither credit provides school districts with any additional financial support for education.
• The existence of the credits may actually encourage local school boards to increase gross property tax levies, although quantifying their impact is difficult.
• The school levy credit provides property tax relief to all owners of property located in Wisconsin regardless of whether the property owners reside in the state.
• Only 51 percent of the total school levy credit reduces property taxes of Wisconsin homeowners on their primary residences.
• Among homeowners, the largest credits flow to owners of expensive homes. Even before receipt of the credits, many of these homeowners face below-average property tax burdens relative to income. Many Wisconsin residents bearing the largest burdens relative to income receive little benefit from the two credits.
• On a per student basis, property owners in the property-wealthiest school districts are allocated school levy credits that are nearly seven times larger than those going to property owners in the poorest school districts.
• The first dollar credit results in larger percentage reductions in property taxes for owners of less valuable properties. Nevertheless, the allocation of the first dollar credit to parcels results in much higher than the average property relief per student flowing to the property-wealthiest school districts.