The funding mechanism that provides state dollars to towns, cities and counties across Wisconsin received its first major update in decades under a bipartisan measure signed into law Tuesday by Gov. Tony Evers.
The local aid bill, as well as a separate measure increasing education funding, were forged over the last several months and culminated with a deal struck between the Legislature’s GOP leaders and Evers to boost local aid — also known as shared revenue — using a portion of the state’s 5% sales tax.
Another component of the bill allows officials in Milwaukee and Milwaukee County to increase local sales taxes to address mounting pension debt and avoid bankruptcy, but Milwaukee City Council officials have said they are exploring possible legal action against other Milwaukee-specific provisions in the bill.
Joined by state lawmakers and local officials at a Wausau Fire Department station, Evers said the bill is the result of “historic compromise” between the Democratic governor and Republicans, who control the state Legislature.
“This historic day represents the culmination of relentless work over many, many years,” Evers said of the shared revenue increase he’s requested for four years. “For far too long, our local communities have been forced to do more with less.”
On this episode of Rewind: Your Week in Review, Emilee and JR discuss the ending of the standoff between top Republicans and Gov. Tony Evers over a bill to overhaul funding to local governments and save Milwaukee from a looming fiscal crisis. Assembly Speaker Robin Vos, Senate Majority Leader Devin LeMahieu and Gov. Evers reached a deal last Thursday to give every municipality a minimum increase of 20% in state aid, including allowing Milwaukee officials, instead of voters, to raise their local sales tax in part of a much larger package to increase funding to K-12 schools.
The agreement between Evers and GOP leaders would also include several boosts to education spending, including a more than $1 billion increase in revenue for K-12 schools, a $325-per-pupil increase to revenue limits for the next two fiscal years, and per-pupil aid increases for choice and independent charter schools that would give K-8 students a $1,101 increase and high school students a nearly $3,000 increase.
Evers said the education bill was signed privately before Tuesday’s press conference in Wausau. The funding mechanisms in both bills will be a part of the state’s biennial budget, which is likely to be sent to the governor in the coming weeks.
To help support local governments, the state would divert 20% of the state’s 5% sales tax to counties and municipalities. GOP-authored provisions in the bill stipulate those funds need to be directed to local services such as police, fire and emergency services. The law provides cities and towns with nearly $207 million in aid, while counties will receive $68 million, according to the nonpartisan Legislative Fiscal Bureau.
Sen. Mary Felzkowski, R-Irma, said on Twitter Tuesday the funding increase ensures “every town, village, city, and county in Wisconsin has the resources they need to provide necessary and expected government services like police, fire, and EMS.”
“This is a monumental day for Wisconsin, and a true testament of what can get done when we work across the aisle,” Felzkowski added.
Sales tax could go up
The agreement also allows Milwaukee County to increase its 0.5% sales tax by 0.4 percentage points, while Milwaukee could impose a 2% sales tax.
Sen. LaTonya Johnson, D-Milwaukee, said the local aid agreement “means absolutely everything.”
“It is our city’s opportunity to start over,” Johnson said.
The question of whether Milwaukee and Milwaukee County voters or elected officials should have final say on local sales tax increases to address mounting pension obligations became a sticking point between Assembly Speaker Robin Vos, R-Rochester, and Senate Majority Leader Devin LeMahieu, R-Oostburg.
The original proposal required city and county voters to approve the tax increases, something that Vos supported but Evers and LeMahieu were against, preferring to have local officials vote on any increases.
LeMahieu and Vos said earlier this month they would axe the Milwaukee and Milwaukee County sales taxes provisions entirely unless they reached a deal on it with Evers. Ultimately, both parties agreed to allow the city and county officials to raise local sales taxes if they approve the measures with a two-thirds majority.
In addition to increased local aid, the bill also includes measures opposed by some Democratic lawmakers that bar local governments from putting advisory referendums before voters and prevent local health officials from closing a business for more than 30 days to help control an outbreak or epidemic.
Other components of the law directly target Milwaukee, including one requiring the hiring of 25 school resource officers for Milwaukee schools and another barring the city from using funds on “any position for which the principal duties consist of promoting individuals or groups on the basis of their race, color, ancestry, national origin, or sexual orientation.”
Several Republicans also opposed the bill, largely because of provisions allowing Milwaukee and Milwaukee County officials to increase sales taxes.
Milwaukee ‘called out’
Milwaukee Ald. Marina Dimitrijevic told CBS 58 Tuesday the Milwaukee City Council is exploring potential legal action against several items in the law, including those restricting diversity hires and limits to the city’s Fire and Police Commission.
“The city of Milwaukee was uniquely called out on a number of items,” Dimitrijevic said. “We have a united voice in being very opposed to some of these attacks on local control.”
Milwaukee City Council President José Pérez said in a statement the council will soon consider legislation to double funding for the city’s Office of Equity and Inclusion and Office of African American Affairs and set aside funds for a legal fight against “provisions of the bill that overstep our home rule.”
Pérez said the policy provisions in the new law “will directly restrict our ability to achieve many of our goals, and clearly, they were written by those that do not reflect nor appreciate Milwaukee’s vibrant, diverse population.”
“Despite the Legislature’s efforts to impose their values on us, we are resolute in our promise to operate our government in accordance with the values of our diverse community,” Pérez added.
The measure would also repeal Wisconsin’s personal property tax, which businesses pay on furnishings and equipment. Lawmakers on both sides of the aisle have tried in recent years to eliminate the tax, but had failed to reach a consensus.
Wisconsin’s shared revenue program was created in 1911 and initially provided local municipalities 70% of state income tax collections, while counties and the state received the remaining 20% and 10%, respectively.
Shared revenue remains among the state’s biggest programs. But it has dropped from 12.5% of the general fund budget in 1994-95 to less than 5% now, according to the Legislative Fiscal Bureau.
Photo Credit: chayanuphol / Shutterstock
The COVID-19 pandemic created unprecedented hardship for large segments of the U.S. economy. However, one unexpected bright spot was the expansion of state stabilization funds—also known as rainy day funds—driven largely by increases in tax revenue.
At the beginning of the pandemic, the economy halted, and a short-lived but steep recession ensued. Stay-at-home orders and social distancing changed the way Americans lived, and as a result, their spending habits dramatically shifted. These changes caused many small businesses to be temporarily or permanently closed, and state balance sheets declined.
But this pandemic-induced recession was fleeting. The economic downturn quickly reversed in large part due to bipartisan legislation that swiftly provided fiscal support directly to individual taxpayers, businesses, and state governments. The combination of broad fiscal stimulus and higher-than-expected tax revenue pushed state rainy day funds to a record high. During 2021, states grew their budget surpluses by more than 60%.
While states received direct financial support from the federal government, tax revenue was the primary contributor to state budget surpluses. State and local governments rely heavily on taxes to finance their operations. According to the Census Bureau, in 2020, total state and local government tax revenue amounted to nearly $1.9 billion—twice as much as intergovernmental revenue, which is the next largest revenue source. State and local taxes comprise several different types of taxes, but the largest sources come from sales and gross receipts, property, and individual income.
All but seven states tax some form of individual income, and all but nine states tax wage income. In total, individual income tax accounted for 9.9% of total state and local revenue and 22.8% of total state and local tax revenue in 2020, the most recent full year available. Today, individual income tax makes up a much larger proportion of total tax revenue than it did several decades ago in 1977, when it accounted for less than 17% of total tax revenue. While both individual income tax as a share of total revenue and as a share of total tax revenue dipped from 2019 to 2020, individual income taxes continue to be a significant revenue source for most states.
Looking ahead, many of the temporary factors that helped push state rainy day funds to record highs are projected to subside. Another issue for certain locations is that increases in remote work opportunities have encouraged residents to leave high-tax states, especially those states with high income taxes. According to the Tax Foundation, states with double-digit income taxes (such as California, New Jersey, and New York) were among the states that lost the most residents in 2021. Meanwhile, states that forgo individual income taxes altogether (such as Florida, Texas, and Nevada) reported some of the largest population increases.
To find the states that collect the most individual income tax, researchers at HowtoHome.com analyzed data from the U.S. Census Bureau. The researchers ranked states according to each state’s individual income tax revenue as a share of total revenue. Researchers also calculated individual income tax revenue as a share of total tax revenue, total individual income tax revenue, total tax revenue, and total revenue.
Here are the states that collect the most individual income tax.
States That Collect the Most Individual Income Tax
One unexpected bright spot of the COVID-19 pandemic was the expansion of state stabilization funds—also known as rainy day funds—driven largely by increases in tax revenue. State and local governments rely heavily on taxes to finance their operations, with the largest sources coming from sales and gross receipts, property, and individual income. While both individual income tax as a share of total revenue and as a share of total tax revenue dipped from 2019 to 2020, individual income taxes continue to be a significant revenue source for most states. Researchers ranked states according to each state’s individual income tax revenue as a share of total revenue.
Photo Credit: chayanuphol / Shutterstock
The COVID-19 pandemic created unprecedented hardship for large segments of the U.S. economy. However, one unexpected bright spot was the expansion of state stabilization funds—also known as rainy day funds—driven largely by increases in tax revenue.
At the beginning of the pandemic, the economy halted, and a short-lived but steep recession ensued. Stay-at-home orders and social distancing changed the way Americans lived, and as a result, their spending habits dramatically shifted. These changes caused many small businesses to be temporarily or permanently closed, and state balance sheets declined.
But this pandemic-induced recession was fleeting. The economic downturn quickly reversed in large part due to bipartisan legislation that swiftly provided fiscal support directly to individual taxpayers, businesses, and state governments. The combination of broad fiscal stimulus and higher-than-expected tax revenue pushed state rainy day funds to a record high. During 2021, states grew their budget surpluses by more than 60%.
Shutterstock
While states received direct financial support from the federal government, tax revenue was the primary contributor to state budget surpluses. State and local governments rely heavily on taxes to finance their operations. According to the Census Bureau, in 2020, total state and local government tax revenue amounted to nearly $1.9 billion—twice as much as intergovernmental revenue, which is the next largest revenue source. State and local taxes comprise several different types of taxes, but the largest sources come from sales and gross receipts, property, and individual income.
All but seven states tax some form of individual income, and all but nine states tax wage income. In total, individual income tax accounted for 9.9% of total state and local revenue and 22.8% of total state and local tax revenue in 2020, the most recent full year available. Today, individual income tax makes up a much larger proportion of total tax revenue than it did several decades ago in 1977, when it accounted for less than 17% of total tax revenue. While both individual income tax as a share of total revenue and as a share of total tax revenue dipped from 2019 to 2020, individual income taxes continue to be a significant revenue source for most states.
Looking ahead, many of the temporary factors that helped push state rainy day funds to record highs are projected to subside. Another issue for certain locations is that increases in remote work opportunities have encouraged residents to leave high-tax states, especially those states with high income taxes. According to the Tax Foundation, states with double-digit income taxes (such as California, New Jersey, and New York) were among the states that lost the most residents in 2021. Meanwhile, states that forgo individual income taxes altogether (such as Florida, Texas, and Nevada) reported some of the largest population increases.
To find the states that collect the most individual income tax, researchers at HowtoHome.com analyzed data from the U.S. Census Bureau. The researchers ranked states according to each state’s individual income tax revenue as a share of total revenue. Researchers also calculated individual income tax revenue as a share of total tax revenue, total individual income tax revenue, total tax revenue, and total revenue.
Here are the states that collect the most individual income tax.
Photo Credit: Izabela23 / Shutterstock
Individual income tax revenue as a share of total revenue: 11.1%
Individual income tax revenue as a share of total tax revenue: 21.7%
Total individual income tax revenue: $2,359,093,000
Total tax revenue: $10,860,932,000
Total revenue: $21,256,402,000
Shutterstock
Photo Credit: Sean Pavone / Shutterstock
Individual income tax revenue as a share of total revenue: 11.3%
Individual income tax revenue as a share of total tax revenue: 28.4%
Total individual income tax revenue: $12,505,906,000
Total tax revenue: $44,011,586,000
Total revenue: $110,400,823,000
Shutterstock
Photo Credit: Sean Pavone / Shutterstock
Individual income tax revenue as a share of total revenue: 11.3%
Individual income tax revenue as a share of total tax revenue: 26.8%
Total individual income tax revenue: $11,704,328,000
Total tax revenue: $43,708,584,000
Total revenue: $103,264,080,000
Shutterstock
Photo Credit: Mihai Andritoiu / Shutterstock
Individual income tax revenue as a share of total revenue: 11.8%
Individual income tax revenue as a share of total tax revenue: 30.0%
Total individual income tax revenue: $1,744,674,000
Total tax revenue: $5,810,994,000
Total revenue: $14,835,230,000
Shutterstock
Photo Credit: Sean Pavone / Shutterstock
Individual income tax revenue as a share of total revenue: 12.8%
Individual income tax revenue as a share of total tax revenue: 30.0%
Total individual income tax revenue: $9,590,894,000
Total tax revenue: $31,940,021,000
Total revenue: $75,170,061,000
Shutterstock
Photo Credit: Sean Pavone / Shutterstock
Individual income tax revenue as a share of total revenue: 12.9%
Individual income tax revenue as a share of total tax revenue: 33.0%
Total individual income tax revenue: $6,434,162,000
Total tax revenue: $19,495,610,000
Total revenue: $50,023,462,000
Shutterstock
Photo Credit: Mihai Andritoiu / Shutterstock
Individual income tax revenue as a share of total revenue: 12.9%
Individual income tax revenue as a share of total tax revenue: 21.9%
Total individual income tax revenue: $15,412,766,000
Total tax revenue: $70,318,773,000
Total revenue: $119,261,406,000
Shutterstock
Photo Credit: Sean Pavone / Shutterstock
Individual income tax revenue as a share of total revenue: 12.9%
Individual income tax revenue as a share of total tax revenue: 30.5%
Total individual income tax revenue: $84,412,243,000
Total tax revenue: $276,549,753,000
Total revenue: $651,904,381,000
Shutterstock
Photo Credit: IVY PHOTOS / Shutterstock
Individual income tax revenue as a share of total revenue: 13.8%
Individual income tax revenue as a share of total tax revenue: 29.4%
Total individual income tax revenue: $10,923,158,000
Total tax revenue: $37,137,398,000
Total revenue: $79,427,041,000
Shutterstock
Photo Credit: Jon Bilous / Shutterstock
Individual income tax revenue as a share of total revenue: 14.2%
Individual income tax revenue as a share of total tax revenue: 39.1%
Total individual income tax revenue: $8,635,691,000
Total tax revenue: $22,065,012,000
Total revenue: $60,946,595,000
Shutterstock
Photo Credit: Jon Bilous / Shutterstock
Individual income tax revenue as a share of total revenue: 14.9%
Individual income tax revenue as a share of total tax revenue: 31.0%
Total individual income tax revenue: $14,996,649,000
Total tax revenue: $48,311,690,000
Total revenue: $100,686,538,000
Shutterstock
Photo Credit: Sean Pavone / Shutterstock
Individual income tax revenue as a share of total revenue: 15.8%
Individual income tax revenue as a share of total tax revenue: 26.9%
Total individual income tax revenue: $8,177,456,000
Total tax revenue: $30,416,426,000
Total revenue: $51,910,360,000
Shutterstock
Photo Credit: ESB Professional / Shutterstock
Individual income tax revenue as a share of total revenue: 16.5%
Individual income tax revenue as a share of total tax revenue: 34.1%
Total individual income tax revenue: $17,414,713,000
Total tax revenue: $51,013,885,000
Total revenue: $105,809,443,000
Shutterstock
Photo Credit: Sean Pavone / Shutterstock
Individual income tax revenue as a share of total revenue: 18.1%
Individual income tax revenue as a share of total tax revenue: 33.9%
Total individual income tax revenue: $67,963,993,000
Total tax revenue: $200,443,056,000
Total revenue: $376,214,893,000
Shutterstock
Photo Credit: Sean Pavone / Shutterstock
Individual income tax revenue as a share of total revenue: 21.7%
Individual income tax revenue as a share of total tax revenue: 40.5%
Total individual income tax revenue: $17,030,628,000
