Democrats propose giving cities, villages ability to have their own sales tax

WAUKESHA, Wis. (CBS 58) -- When someone purchases a gag gift at the Joke Shop in downtown Waukesha, a sales receipt notes Wisconsin's current 5% sales and use tax. A group of Democratic state lawmakers are serious about allowing municipal governments the ability to have their own sales tax.

Currently, cities and villages are not allowed to charge a sales tax unless they have specific exemption, such as Milwaukee and resort towns like Eagle River and Wisconsin Dells. Counties can enact a sales tax of 0.5%, and 70 of Wisconsin' 72 counties have taken advantage of that ability.

Waukesha and Winnebago counties are the only ones without a sales tax.

The proposed bill would allow counties to increase their existing sales tax by between 0.1% and 0.5%, while municipal governments could enact a sales tax of anywhere between 0.1% and 0.5%. 

The bill's authors say it's a way to make local governments less dependent on property taxes. Right now, their primary sources of funding are property tax levies and shared revenue from the state, which was revamped in 2023 to tie communities' share to statewide sales tax revenue.

"One thing I hear [from local leaders] is they want other streams of revenue, so they can get off the reliance on property tax alone," State Rep. Clint Anderson (D-Beloit) said. "And this is the one solution they said would be helpful. Thirty-eight states across the country already do this; Wisconsin should be the 39th."

Waukesha Mayor Shawn Reilly said he supported the idea of giving cities the ability to pursue a sales tax. He echoed the bill's authors in saying the city would like to take some of its tax burden off property owners while still ensuring services.

Reilly added local governments' hands are tied even more tightly because their property tax levies are tied to the rate of new construction.

He shared documents outlining how Wisconsin's levy limit increased by an annual average of 1.2% going back to 2014. That growth rate has trailed the rate of inflation every year since 2018.

State Sen. Mark Spreitzer (D-Beloit) said stateline communities, in particular, would benefit. He shared estimates showing Beloit could bring in $5 million annually with a sales tax. For Janesville, a sales tax could bring in an additional $12 million.

"It's not just Wisconsin residents paying that [sales] tax," Spreitzer said. "It's our visitors from Illinois, Minnesota, Michigan, Iowa who come and enjoy our state, use our services; they would also help pay for those services at the local level."

Republicans in control of the Legislature indicated the bill is dead on arrival. Senate Majority Leader Devin LeMahieu (R-Oostburg) called the proposal "unserious" in a statement.

Assembly Leader Robin Vos said the proposal would raise the cost of doing business for many companies while ultimately making Wisconsin a more expensive place to live.

"As we’ve seen in other states, the middle class will be bearing the brunt of these additional costs," Vos said in a statement. "These proposals do nothing to improve local government.”

In downtown Waukesha, Joey Gudgeon, the owner of Joey's Diner, said he felt sandwiched between the arguments. The business owner said he didn't want to see the city sacrifice services, but he also didn't want customers to see higher prices on their bills.

"I see both viewpoints, where people would want tax, and some people think we're overtaxed," Gudgeon said. "I understand the cities have crunches with budgets and whatnot."

Selfishly, Gudgeon also wondered whether a local sales tax would also mean more headaches as it relates to annual tax paperwork.

"I actually have an accountant and attorney that do all my paperwork, so it makes it a little easier," he said. "However, that costs [money], too."