By M.D. Kittle | Wisconsin Reporter
MADISON — You’re curious, right?
Who wouldn’t be? It’s such a big, weighty thing.
We’ve all got to face them — well, most of us anyway. But how much do we really know about them?
Well, profit by Dale Knapp’s knowledge. The research director at the nonpartisan Wisconsin Taxpayers Alliance offers some answers to everything you ever wanted to know about tax but were afraid to ask.
1. Corporate tax misnomer: Knapp says there is a general misconception that corporate taxes make up the brunt of taxes imposed on Wisconsin businesses. Not so.
“It’s actually the fourth largest tax that businesses pay. It’s swamped by property taxes,” Knapp said. In fact, corporate taxes comprise about 10 percent of the typical business tax bill.
In 2011, Wisconsin companies paid $4.3 billion in property taxes; $1.4 billion in sales taxes; $1 billion in unemployment taxes; and $850 million corporate income taxes.
The other misnomer, driven by political rhetoric, is that Wisconsin is a high corporate income tax state. It depends. “Depending on the year, we’re anywhere from 10th to 30th, in terms of collections because it is sensitive to economic conditions,” Knapp said.
2. Myth: A reassessment of your property raises your property tax.
“Reassessment is a way to get all properties in line in terms of how they are valued, if they haven’t been valued in a few years,” Knapp said. If your property’s value goes up at the same rate other properties around you do, you’re probably not paying more.
3. Lax on use tax – A lot of Wisconsin taxpayers don’t realize that if they purchase something online, they may be responsible for paying a use tax on the purchased item. The state’s revenue collectors lose out on an estimated $64 million in online use taxes each year. They don’t like that. But this taxing issue is becoming less of a problem for the tax man, and consumers.
“As more and more companies collect it, it’s becoming less of an issue. It’s essentially an Amazon issue, and for small retailers selling stuff online,” Knapp said.
4. Goods vs. services – Wisconsin’s sales tax base has significantly eroded over the past 50 years. That’s due in large part to the growth of a service-driven economy versus a goods-based economy. Wisconsin essentially taxes goods, while leaving most services untouched.
“If you think about sales tax as a consumption tax, the base is shrinking as we become more and more of a service economy. That has long-term implications for state revenues,” Knapp said. The state annually collects about $4.1 billion in sales tax.
5. Big winner? It’s common knowledge that Wisconsin Lottery sales go to defray property taxes. But do you know how much? Roughly 30 percent of the total annual proceeds. The vast majority goes to prizes, and a piece pays for administration and marketing. About $150 million per year targets property tax relief, but it does go to its intended purpose. Many states can’t say the same, with lottery revenue marked for one purpose or another ending up in general funds.
“I could see somewhere down the line the money getting shifted to schools, but it’s not a big pot of money when you’re talking about school aids of about $4 billion a year or more,” Knapp said.
Contact M.D. Kittle at firstname.lastname@example.org