Wisconsin’s State and Local Tax Burden Remains Near Historic Low

After falling in 2022 to its lowest level in more than a half century, the share of Wisconsinites’ incomes that they paid in state and local taxes effectively held steady last year, according to a new Wisconsin Policy Forum report.

This ratio, the state and local tax burden, rose slightly in 2023 to 10.0%, up from 9.96% the year prior. State and local tax collections rose slowly in the 2023 state fiscal year, but growth in state residents’ income also slowed, leaving little change in Wisconsinites’ ability to pay their tax bills.

The long-term trend is that state and local tax burdens have decreased in Wisconsin over the last 50 years. For each of the last nine years, state and local taxes have comprised less than 11% of personal income, which was not true of any other year in our records going back to 1970.

Each year the Wisconsin Policy Forum examines every local and state tax paid, from the state bingo tax ($177,000 in 2023) to gross local property taxes ($12.51 billion). To these fiscal year 2023 figures, we compare state personal income data from the prior calendar year, in this case 2022, to calculate tax burdens. Here are trends in some of the largest taxes at each level of government:

Local taxes

Local tax collections rose by 3.2% in 2023, more than the increase of 2.0% in the previous year but still in line with those in 2020 and 2021 and less than the rate of inflation over this period. Meanwhile, as the economy decelerated, personal income levels rose just 2.0% in calendar year 2022. As a result, the local tax burden rose slightly to 3.30%, up from 3.26% in 2022.

The key local funding source for most local services in Wisconsin, gross property taxes, rose 2.4% to $12.51 billion in 2023. In recent years, state limits on the amount by which local governments can increase their property tax levy – as well as limits on school district revenues, including property taxes — have slowed this rate of increase. As a result, local property tax collections do not always follow broader economic trends, and in each of the last few years, property tax collection increases have not kept up with inflation.

Counties can opt to levy a 0.5% sales tax on top of the state’s 5% rate; 68 of 72 have done so. They saw healthy growth in sales tax collections, which rose by 8.2% to $598.5 million. Next year, local sales tax collections should rise significantly, as new sales taxes were approved in Milwaukee County (0.4%) and the city of Milwaukee (2.0%) after being authorized under 2023 Wisconsin Act 12.

County and municipal governments can choose to levy a vehicle registration fee, or “wheel” tax, and many have done so over the past decade. In 2023, 15 counties and 36 municipalities imposed a

fee, as collections increased by a more modest 1.7% to $65.7 million. Municipalities in Wisconsin also can levy up to an 8% tax in most cases on hotel and other lodging stays. Room tax collections rose 6.3% to $120.9 million in our most recent year of data.

State taxes

After substantial increases in recent years, the growth in state tax collections cooled last year. Total state tax revenues rose 2.1%, to $24.27 billion in 2023, which was a slowdown from the preceding two years. The state tax burden in 2023 stayed exactly the same at 6.70%. That makes each of the last two years tied for the lowest state burden in the Forum’s more than 50 years of data.

Individual income tax collections in Wisconsin rose by 2.2% in 2023 to $9.41 billion. Corporate income tax revenues declined by 7.1% to $2.75 billion in 2023, marking the first year since 2018 in which they fell. From 2018 to 2022, corporate tax collections more than tripled, due to state and federal law changes that increased the amount of income being reported in corporate tax returns and a state initiative to boost auditing of out-of-state companies. The decrease this past year likely reflects, in large part, effects of a slowing economy and rising interest rates.

State sales tax collections in 2023 grew by 6.8% to $7.46 billion. This is the third straight year in which sales tax revenues grew by more than 6% after not doing so even one time since 2000. As the economy has grown and inflation remained relatively high, sales tax collections have risen apace. They are likely to moderate moving forward as inflation slows.

Total state excise taxes declined by 5.6% in 2023, the largest drop in a single year since at least 1980. Most excise tax collections come from cigarettes. In 2023, the state collected $444.7 million from cigarette taxes, a 7.8% decline. Tax collections on beer fell 6.9% to $8.3 million, likely reflecting in part the rise of hard seltzer drinks. Liquor and wine tax collections rose by 6.9% to $69.4 million. Meanwhile, taxes on vaping products rose 71.2% from $4.1 million in 2022 to $7.1 million in 2023.

Federal taxes

Wisconsin residents’ taxes paid to the federal government are projected to decline 1.8% in 2023, dropping to $69.16 billion from $70.40 billion in the previous year. As we do each year, we estimated figures for 2023 since the federal data for Wisconsin have not yet been published. With the expected drop in federal tax collections, Wisconsinites saw the combined federal, state, and local tax burden decline from 29.8% in 2022 to an estimated 29.1% in 2023.

Over the past several decades, Wisconsin has substantially reduced the amount of taxes it collects as a share of the income of state residents. To some degree, the goals of reducing the tax burden and maintaining or increasing public services are in conflict with one another for policymakers and voters, particularly when the economy slows.

Ultimately, that tension may make it more difficult to continue lowering the state and local tax burden without some combination of service reductions, increased efficiency through service sharing or consolidation, or greater economic growth that boosts incomes.

The Wisconsin Policy Forum is the state’s leading source of nonpartisan, independent research on state and local public policy. As a nonprofit, our research is supported by members including hundreds of corporations, nonprofits, local governments, school districts, and individuals. Visit wispolicyforum.org to learn more.