By Senator Howard Marklein
June 23, 2017
Taxing Cows, Pigs & Chickens
Working Toward a Repeal of the Personal Property Tax
It is time for Wisconsin to repeal the Personal Property Tax (PPT). As a member of the Joint Finance Committee (JFC) focused on tax reform ideas, I have proposed a full repeal of this tax to my colleagues as we work to finish the state budget.
The PPT is an outdated, unfair, cumbersome tax on small businesses that has an exorbitant, unreasonable cost for compliance. The PPT is assessed on tangible personal property such as equipment and furniture on an annual basis. It is assessed on anything that can be touched and moved for its entire lifecycle. This means that there are 20+ year old desks in businesses that are still taxed every single year. The taxes are assessed and collected by local governments – cities, towns and villages.
Throughout the last 50 years, the legislature has slowly carved away at this tax, exempting various items such as inventories and industries such as manufacturing, agriculture and most recently, computers. The PPT continues to be paid by businesses that do not benefit from the past legislative exemptions. Businesses pay a sales tax when they buy furniture and equipment. These businesses then face the prospect of paying PPT on the item every year as long as they own it.
As a result, the cost for small businesses to comply with this law can often be more than the actual tax. For example, a small business may pay $200-300 more to prepare and file the tax than the actual tax itself. This is an unnecessary burden on small businesses in our communities. Big businesses can absorb these costs and perform the necessary bookkeeping with existing resources, but many small businesses are forced to hire assistance to comply.
The estimated impact of repealing the PPT would be a $239 million savings per year for businesses in Wisconsin. However, this savings would leave the same sized hole in revenues for local governments. Every time the legislature has carved out an exemption, we have backfilled the fiscal impact on local governments with other dollars. If we were to repeal the PPT, the legislature would look to do this again. There are ways that we can accomplish this within the budget this year.
As local governments join the discussion about repealing the PPT, they have expressed concerns about losing revenue. I have asked each municipality to consider how they were impacted when we exempted computers. The state backfilled their lost “computer” revenue for the past 12 years and it has been a successful transition.
In addition, it is important to note that this is not a “big business tax break”. Repealing the PPT will benefit small businesses more than any other entity in Wisconsin. The cost of compliance and the disincentive this tax creates to invest in a small business are major obstacles for small businesses.
On May 24, 2017, the Senate Committee on Revenue, Financial Institutions and Rural Issues, that I chair, held a public hearing on Senate Bill (SB) 218, which repeals the PPT. We had dozens of people testify or submit written testimony in favor of this bill. No one testified opposed. We did not hear from any big businesses. We did hear from small business owners from every part of the state. The only entity that has opposed it publically is the City of Milwaukee.
During the hearing, we listened to stories from business owners who have to submit multiple PPT statements for every municipality in which they have locations. We heard from businesses that want to invest in new equipment they need to expand, but hesitate to grow because of the PPT taxes they will be assessed from now into the future. Business associations reached out to share their challenges in recruiting businesses from neighboring states that don’t have the PPT. None of our neighboring states have a PPT, which puts Wisconsin at a competitive disadvantage. It’s time to relieve this burden.
The PPT was developed early in the history of our state before income and sales taxes. It was a way for the state to collect revenue from farmers, business-owners and industries. At one time, we taxed every piece of property or inventory involved in every business. With each exemption and the growing sophistication of businesses in Wisconsin, the PPT repeal becomes more important.
I am optimistic that the legislature has the opportunity to repeal this tax in the current budget. Repeal will relieve a burden on businesses, but it will also encourage businesses to reinvest, grow and expand. Reinvestment, growth and expansion means jobs, higher pay and economic development. This is just one more way our legislature can impact our statewide economy.
For more information and to connect with me, visit my website http://legis.wisconsin.gov/senate/17/marklein and subscribe to my weekly E-Update by sending an email to Sen.Marklein@legis.wisconsin.gov. Do not hesitate to call 800-978-8008 if you have input, ideas or need assistance with any state-related matters.