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Sales-tax ranking

Sales-tax ranking

By Matt Pommer

Sept. 4, 2002

Many complain that Wisconsin taxes are too high compared to neighboring states. But that’s an unfair criticism when it comes to the combined bite of state and local sales taxes.

In Wisconsin, the state collects a 5 percent sales tax and counties can levy an additional half percent. The 1995 Legislature also imposed one-tenth of a percent sales tax on five Milwaukee area counties to help pay for Miller Park, the new home of the last-place Milwaukee Brewers. That means the maximum combined state and local sales tax in Wisconsin is 5.6 percent. (Lake Delton and Wisconsin Dells also impose a half percent resort area tax, but its scope is limited to tourism-related items.)

Wisconsin’s 5.6 percent state-local sales tax compares to these maximums in Midwestern states: Minnesota, 7.5 percent; Iowa, 7 percent; Missouri, 8.225 percent; Illinois, 8.75 percent; Indiana, 6 percent (effective in 2003); Michigan, 6 percent; and Ohio, 7 percent. The figures were compiled by the Wisconsin Counties Association, which obtained its data from the Federation of Tax Administrators.

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In major tourism states, the combined sales tax is: Nevada, 7.5 percent; Arizona, 8.6 percent; California, 8.25 percent; Arkansas, 8.120 percent; Louisiana, 9.5 percent; Florida, 8.5 percent; and New York, 8.5 percent.

It should be stressed that not all municipalities or counties in all of the states are at the maximum rates in the WCA data. The various states have a crazy quilt of rules and regulations over who decides how high the sales tax should be. Comparing sales taxes also is tricky because there are differences in what is subject to the tax. In Minnesota, for example, clothing is exempt from the sales tax. It can easily be argued, especially in the Minnesota winters, that clothing is an essential commodity.

The sales tax in most states focus on goods rather than services. But the Internet has enabled many to escape the sales tax in their home states, and some Legislatures are turning their eyes toward imposing the sales tax on services.

Wisconsin’s tax situation is tricky because state government sends huge amounts of money back to schools districts, counties and municipal governments. Wisconsin attempts to equalize the tax burden among counties, school districts and municipal governments in an attempt to discourage raiding of industry and business within the state.

Fiscal experts say a one-percent increase in the state sales tax could raise an additional $700 million for the state. The governor and Legislature elected in November will face a $1.34 billion structural deficit in fiscal year 2003-2004. Without any cut in spending or a tax increase, the state’s economy would need to grow by 12.3 percent that year to fill the hole. State officials would be delighted if the economy grows by even 5 percent.

There are candidates for office, like Gov. Scott McCallum and Attorney General Jim Doyle, who vow there won’t be any state tax increase. This year, McCallum argued unsuccessfully to reduce and then phase out the $1.039 billion in shared-revenue aid that goes to county and municipal governments. Doyle has yet to provide any particulars for his budget-balancing ideas.

The other two Democratic gubernatorial candidates have tax ideas. Kath
leen Falk wants an 85-cent per pack increase in cigarette taxes, and Tom Barrett wants to reexamine the exclusions to the state’s sales tax.

Matt Pommer is the dean of correspondents covering the state Capitol.

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