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DISCUSSION: There's Nothing Sexy About A Tax

We sure like to talk about them, but we often leave out a few details.

I’m concerned about how politicians talk about taxes—Republicans and Democrats alike.

More specifically, I’m concerned with what they don’t say. Politicians tend to ignore the interdependent cash flow relationships between lower levels of government. And, you often don’t hear about their role in that decision, the tax shifting that continues to impact these budgets and overall increases in state spending.

To underscore this point, officials with the Wisconsin Taxpayer Alliance (WISTax) reported last month that state spending increased in Wisconsin and exceeded national averages in both 2011 and 2012. Our budget reserves are also among the smallest in the nation.

“State spending here rose 5.8 percent in 2011 and was budgeted to grow 4.4 percent in 2012. National averages were 4.0 percent and 2.9 percent, respectively,” according to the report.

Closer to home, state lawmakers cut state shared revenues and state aids to Racine County, Village of Caledonia, Gateway Technical College and the Racine Unified School District by $5.8 million, a 13.86 percent decrease over last year. But I have to point out that my overall property tax bill increased and the only line item that decreased was the state portion of the bill, which represents about 1 percent of my total tax bill. Meanwhile, most of my $95, or 3.4 percent, increase included tax levy increases from Racine Unified (7.2 percent increase), Gateway (2.9 percent increase), County (1.3 percent increase, and the Village (.9 percent increase).

But I also want to tell the other side of the story, that yes, state lawmakers cut funding to schools, but they also allowed school boards to increase their tax levies.

Why is this? Tax shifting.

The 2010-11 property tax increase was driven by school taxes. Although school levies rose less this year (3.4 percent) than last (6 percent), the increase was larger than that of municipalities (2.1 percent), counties (1.9 percent), and technical colleges (2 percent), according to WISTax.

So what’s up with that?

The state cut the payments they typically made to schools, but the state in turn marked the non-payments as a savings back to their budget and offered up tools that allowed school boards to control spending by nixing collective bargaining, requiring employees to kick in more in their pension payments and paying higher premiums for their insurance. Racine Unified lost $13 million of the $137 million in state aid payments they received in 2010-11. So, even though they spent less money in their , the school districts were allowed to increase the school levy and the school district’s portion on your tax bill represents 39 percent of the total bill while the state portion represents less than 1 percent.

Confused yet? At the end of the day, the District still raised the school portion of your tax bill and that represented most of the increase (at least in my tax bill). To be fair, I know that some people saw a net tax decrease, but I guess I’m not so lucky. So is that really a tax cut if taxpayers still pay more property taxes at the end of the day?

As taxpayers, I don’t think we realize how much money flows between federal, state, county and local governments and the impact that has on us. We look at the line items on our tax bills as separate items–the Racine Unified School District, Gateway Technical College, the County and the Village.

And to an extent, they are also separate entities, but there’s a financial tie each of those entities that the state controls.

To be fair, you also saw this same thing happen during Gov. Jim Doyle’s administration, but not to this degree. He too reduced shared revenue payments to municipalities and school districts, but not nearly as much. When I covered the City of West Allis, elected officials counteracted that decrease in revenue by pulling the cost of recycling (because it wasn’t a mandated service) out of the city’s budget and set it up as a user fee as a separate line item on their tax bill.  Taxpayers were still paying for the cost of recycling, but it was no longer embedded in the City’s budget and they increased their budget accordingly to spend the money on other things.

So what am I really getting at here?

Even though both sides of the aisle tend to favor certain programs in how they spend tax dollars, I have often heard state Republicans and Democrats ignore their role in intergovernmental transfers and aids. 

In short, cuts in state aids become savings, but the weird thing is… the state still spent more money than it did last year.

Let me be clear, I’m not saying that I oppose this shifting. It happens. These shifts represent different political ideologies on how tax dollars are spent and that happens when we elect government officials.

But I don’t really think we’re showing the whole picture when it comes to taxes. I respect the differences ideologies between the parties, but we need to think about our taxes in a more holistic way – after all, aren’t all of those property taxes coming from the same person…the taxpayer?

JW January 09, 2012 at 12:31 PM
I agree with what you are pointing out... about the tax shifting... but that does depend on local issues and speak to local problems. Having public employees contribute more to their benefits and limiting their ability to hold employers hostage with excessive bargaining rights could only have a positive fiscal impact... another thing to add that isnt part of your article, is whether taxes would have gone up significantly more without some of the work done at the State level. Changing spending and savings habits at government levels cannot be done in one swoop... it is more of a philosophy that has to be carried out over years. Sometimes the feds give us something no one is even expecting or asking for, like the decrease in the social security tax rate. It is all nice on the surface, however, what ramifications will that lost revenue have. I'd rather see controlled spending used to eventually reduce taxes than reduced taxes contributing to running deeper in debt. We all know as individuals that we cannot survive by continually living in debt... its the same for government... eventually someone has to pay... and it gets worse the bigger the debt gets and as a double whammy when debt gets large and creditors get a reason, they love to up the interest rate. Trying to control spending IS more important than purely controlling taxes. Controlling spending logically leads toward future tax reduction, whereas tax reduction first does not lead to controlling spending.
Tuco January 09, 2012 at 01:17 PM
I don't have a problem with tax shifting, afterall, locals know more about local issues than the state does. Let's keep our money local. I have a problem with cutting a program only to find out later that the "saved money" was moved to another program! The big problem with taxes is there is a small group of people in Washinton, Madison, Racine County, Caledonis Village, RUSD, Gateway, etc that think they have all the answers. They have become "experts" in spending other people's money and not held accountable! Look how many run unopposed. There is no free lunch and someone, somewhere, sometime will pay.
Denise Lockwood January 09, 2012 at 01:59 PM
Tim... you make an interesting and valid point. You would also be shocked to see how many people don't go to meetings. ;)
Eric January 09, 2012 at 02:13 PM
Why is Caledonia still in Unified at all. We pay a disproportionate amount to its budget and then get to bus our kids off to Racine. In the 9 years I have lived here its never made any sense to me as why Caledonia residents put up with this. You want more control over our taxes at a local level get Caledonia out of Racine Unified. Let them try to find someone elses money to spend.
Heather in Caledonia January 09, 2012 at 02:58 PM
I agree with keeping the spending local. Just like I want to see the charges listed on my bill (how much for Gateway, how much for RUSD, garbage pickup, etc.) for which entity is taking my money. If that money went to the state and we spent willy nilly, I wouldn't know where it went. It makes me a more informed taxpayer and it holds the entities more responsible to the people who live down the street. They serve our community, not people in Minoqua, so we should hold them accountable for spending and performance.
GearHead January 09, 2012 at 10:18 PM
It doesn't help that taxing entities are guilty of backwards budgeting. Backing into a budget occurs because the entity decides how much they want to spend first, and then they figure out where to get the money from. That money comes from the local levy, borrowing, state and/or federal payments. Occasionally a federal spiff will get thrown in (can you say Obama "stimulus" stash?). This is why it is so hard to cut programs once they have been established. The money supply is erroneously considered endless. Having said that, entities are great at starting stupid worthless programs just because there is "free" money available through some federal matching grant. For example, snazzy stainless-steel bike racks on buses that nobody uses. But hey, it was almost free, wasn't it? Not! On the rare occurance they don't backwards budget, they will look at the amount of money they think they'll be getting, and then spend every dime of it. Never do they start at zero and justify the expenditures. Want to cut your taxes? Start at zero, and be aware of how you define "services." Much of what we pay for doesn't come close to that definition.
Denise Lockwood January 10, 2012 at 01:12 AM
How should the budgeting process work? What criteria do you use to weed out worthless programs? Shouldn't we develop a process that reflects our vision and values? BTW...After all of the budget meetings I've covered, I'm shocked at how many people don't go to them. The only people who attended the Village of Caledonia budget meetings were elected officials, department heads and village employees. And I can count on one hand how many times I've seen more than 25 people at a budget meeting for schools and municipality budgets. The state budget (as you can see from that little pie chart above) is less than one percent of our property taxes... while muni/schools make up 65 percent. I don't get it people, I really really don't.
GearHead January 10, 2012 at 02:13 AM
Denise, I'll have some thoughts on this tomorrow
Denise Lockwood January 10, 2012 at 02:23 AM
Lookin' forward to reading them!
Brian Dey January 10, 2012 at 01:18 PM
Denise- If you mention closing a school, cutting athletics or music, you will see hundreds at a school board budget meeting. My first meeting as a school board member had marches in the street, picketers and a small scale scene of Madison last February. The Village at least has some accountability built in, i.e departments actually have to sit down with the board and present the reasoning behind their proposals. While I was the President of Caledonia Parks and Rec, I presented not only my numbers and justification for those numbers, but the board already presented me with what they could do. At least in Caledonia, they operate much like what Gearhead suggests. With the school board, we used to have at least some modecum of scrutiny through our business finance committee. Since cohesive governance, the staff meets with staff, and the CFO presents the budget changes to the board to be voted up or down. Generally, $300 million is reduced down to 2 to 2 pages and that is all the scrutiny that is done. The district operates much like Gearhead says and the budgeting is basically, find more money. That approach is not what the taxpayers deserve. There is zero accountability, and if you want to talk about fund shifting, the district many times, without board approval, shifts money from one fund to another for it's own agenda, not the boards and rarely ever is questioned by the board. This is all encouraged by the system and the treasurer, Don Nielson.
Denise Lockwood January 10, 2012 at 02:38 PM
Brian -- I agree with you that the school districts need to justify expenditures to the board. How else can they be held responsible for the costs of educating children, if they don't see the price tag? Carrying over our other discussion from the other board. I'm very aware of the dynamics between QEO and pay increases. I'm not debating that issue -- Act 10 is a done deal in my eyes. But I'm focused on the levy and spending increases.... we need to look critically at those two numbers because at the end of the day, you and I know there aren't really a number of revenue sources we're dealing with here -- it's all coming from you and I (we're the revenue source). It's not the federal, state, county and local money. It's our money divided up and then renamed into "their" money. But they don't see it that way and if I could change one thing about how we talk about taxes -- that would be it right there. I dont' care if my money goes to the state and gets handed back to the school district, but I do care if once I give it to you, it has somehow become your money simply because of that fact that you possess it.... what I have a real problem with is when politicians stopped giving my money to the schools, say they've saved money by not giving it to them and then turned around and spend 5 percent more of my money.
Heather in Caledonia January 10, 2012 at 02:45 PM
Denise, I have made my thoughts and opinions known to local leaders (school board and village) when there is an issue I want to address. I usually work evenings (or have the kids) and can't attend village meetings. I have gone to a few that have addressed things I was interested in, but I can't make it very often. I rely on the press to cover what's going on and I contact people directly. I'm guessing there are quite a few in my position, but it would be interesting to know how many contacts board members (village and school) receive from people directly.
The Racine Truth January 10, 2012 at 07:28 PM
Denise, as you know, I am big on honesty. You point out a very valid point regarding the recycling charge in West Allis (by the way it is the same in Caledonia). Both political parties are guilty of shifting the tax burden to a user fee, just to create the perception that there was no tax increase. A tax increase needs to be measured as the bottom line of what is out of a taxpayer's pocket, More important though, that little move of the recycling fee to a user fee from the general tax revenue cost West Allis and Caledonia taxpayers more than they realize. You see, most residents of Caledonia itemize on their federal tax return and accordingly they get to deduct their property tax bill from their taxable income (the property tax portion that is the general tax bill is deductible). So, lets assume the recycle fee is $100 a year. That little move of the recycle fee from the general tax levy to a user fee also cost each Caledonia taxpayer that itemizes about an additional $28 in federal income tax. You see, there is no deduction allowed for a recycle user fee, but there is a deduction allowed for a general property tax levy. So, the little game that politicans play not only made it look like or local taxes didn't go up (when in fact it did) but it also cost to $28 additional dollars to the Federal government. Now, in my book, thats a lie!!
Denise Lockwood January 10, 2012 at 07:44 PM
That's why these tax levies have also been allowed to increase because a. we either voted for it through referendum b. the state regulated teacher pay/benefits through qeo and not through levy limits c. we elected people on the board/state officials who really weren't interested in reducing levies. In my mind, the only true tax reduction occurs when an entity spends less money, doesn't shift its debt to other taxing bodies and doesn't transfer it to the tax payer via a user fee/assessment. When Mr. Denise's daughter's tuition went up by $700, I view that as a tax; when the recycling fee is pulled out of the general budget, that's a tax; when you pawn off your shortfall to another taxing body, that creates the possibility for a tax to occur and if you have the ability to control that levy and don't, well..... you are just as responsible for creating that tax increase.
GearHead January 10, 2012 at 11:15 PM
Denise, Budgeting is the ultimate tug-of-war between wants and needs. Between what is nice to have and what actually works. The problem with budgeting is you are chasing a moving target, and everyone has their own idea about what is worthwhile. Some think everything is worthwhile, that nothing can ever be cut, we associate them with higher taxing and spending. But they pat themselves on their back about being compassionate, and guys like Lyle say opposing all this compassion is being greedy and selfish. If I were budget king, my message would be "show me how your department is going to get by with 40% less next year." That means entire departments and divisions need to be examined. You can bet it will at least float up all of the buried flotsam and jetsam. You think whole departments can't be cut? Start with the department of Education. Its stated mission was blah, blah for the kids, blah blah no kid left behind. The immutable truth is test scores have declined since DOE flooded our districts (nationwide) with mandates and money. It took control away from our district. Ditto for dept of Energy. This misbegotten screw-up was foisted on us under the pretense we would actually have an energy policy. Remember long gas lines back in the '70s? We still have no policy, with most energy production blocked instead, thanks to tag-team help from the EPA, another department that should be abolished. (cont.)
GearHead January 10, 2012 at 11:18 PM
What about the "universal service fee" (the Al Gore internet connection fee) for wiring classrooms for internet. Is any classroom not wired yet? WI-FI means no wires. But we still pay. Does any of it come back to RUSD? I doubt it. Would RUSD tell you? (laughing) At some point our local budgets have to be brought back to zero as well, and "worthwhile" services added in as needed. I don't hate kids or puppies. What I hate is institutionalized sloth. Institutionalized sloth. You heard that here first. You want a hint at what is worthy? Does it pass the smell test? Can it be measured? Does it promote self-reliance, or encourage dependency? I think you get the point. It isn't rocket science. It just never gets done because there is a constiuency for every dime that is spent. The adults need to tell the whiny children "NO." And they have been, at least in some corners of the state and county. But those same adults are the ones that are bucked and pilloried every step of the way.

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