Eau Claire businesses will get a $3.6 million break next year as some of their movable property becomes exempt from annual local taxes.
That’s how much businesses paid annually in taxes toward the city and county governments, school district and technical college on $56.9 million in machines, tools and patterns that will become tax-exempt in 2018 due to provisions in the latest state budget.
“This has been such a long time coming,” said Brandon Scholz, president and CEO of the Wisconsin Grocers Association. “The effect that the legislature made to the machine portion of the property tax is huge.”
Scholz’s association is a founding member of the Coalition to Repeal Wisconsin’s Personal Property Tax, which has about 30 trade groups including those that represent builders, broadcasters, convenience stores, dentists, real estate agents, trucking companies and restaurateurs.
The personal property tax is an annual tax businesses pay on their machines, equipment, tools, furniture, fixtures, boats and various other items that aren’t part of their buildings.
The 2017-19 state budget approved in September exempted one category of those taxes. Machines, tools and patterns category accounted for 41 percent out of the $12.6 billion in property subject to the tax.
The new exemption is projected to save businesses $74.4 million statewide. The state government agreed to make up for the tax cut by upping state aid to local jurisdictions by the same amount, but keeping it frozen at that level for the foreseeable future.
There was an attempt to get rid of the personal property tax altogether in the budget, but it didn’t survive into the version that was approved by Gov. Scott Walker. The state Department of Revenue estimated that getting rid of all personal property taxes would amount to $261 million.
Scholz said the coalition will return for the next budget session to continue to lobby for the end of all categories of the personal property tax.
“This has been a long, long, long fight,” he said.
Eau Claire City Councilman David Strobel, who owns an insurance agency and downtown building on South Barstow Street, wants to see the entire tax go away.
“From a small business perspective, I’d like to see the whole thing abolished,” Strobel said.
While he noted that those taxes don’t amount to a lot of money for his company, Strobel said the forms, depreciation schedules and other paperwork are an “administrative nightmare.”
As an elected official who has a say in the city’s budget, Strobel said the amount of money the city gets from the tax also isn’t much compared to property taxes on land and buildings.
Out of about $40 million in property taxes collected for Eau Claire city services, $1.5 million comes from the tax paid by businesses on their movable property, according to the city’s finance department. The newly exempt category accounts for about a third of the personal property taxes that go toward city government.
The new exemption is just the latest in decades of chipping away at personal property taxes charged to businesses. Manufacturing businesses gained exemptions in the 1970s, followed by agricultural equipment in the ’80s and then computers in the ’90s, the coalition’s website notes.
Scholz said the campaign to end the personal property tax isn’t about cutting into local government budgets, it’s meant to relieve businesses of an ongoing tax on items that they’d already paid taxes on when they bought them.
“This was not about trying to restructure municipal services,” he said. “This was about removing this essentially unfair tax.”
He acknowledges critics that contend businesses will now just pocket the tax break. For companies that would, he said that’s their prerogative after paying an unfair tax for decades, but he believes that more will use the money to expand, hire and make capital investments.
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