Wisconsin Institute for Law & Liberty has filed suit against Brown County, Wisconsin in Brown County Circuit Court, alleging that the County’s proposed Sales and use Tax which took effect January 1st violates state law. WILL filed the suit Tuesday afternoon on behalf of the Brown County Taxpayers Association and a resident of Brown County and also names the Secretary of the Wisconsin Department of Revenue as a Defendant.
County supervisors voted in May to create a 0.5% sales and use tax, which took effect Monday. The tax will fund $147 million in spending on various County infrastructure and construction projects, including a new expo center. The tax is to end after six years. Based on the County’s 2018 budget, the Tax will raise over $22 million and spend close to $18 million in 2018 alone.
According to WILL, although Wisconsin law permits counties to impose a “sales and use tax” of 0.5%, such a tax may only be imposed to reduce the existing property tax levy imposed by the County. WILL argues that Brown County’s Sales Tax is not being used to reduce its property tax levy but is instead being used to evade Brown County’s “levy limit” and is therefore void and unenforceable.
WILL argues in the suit that Wisconsin law imposes “levy limits” on political subdivisions, including counties. These limits prohibit counties from increasing their tax levy in any year by a percentage that exceeds their “valuation factor” based on growth. Effectively, a county’s levy is fixed at its current level and can only be raised if the county experiences a net positive growth in property values due to new construction.
Brown County’s 2017 levy was $86,661,972.00 and its 2018 levy limit is $91,115,007. Brown County could only raise its levy $4,453,035 to pay for new spending in 2018. Since Brown County cannot raise its tax levy limit to pay for the new projects (totaling almost $18 million in 2018), it cannot enact a separate tax to do so either.
“Brown County has enacted an illegal tax in violation of State law in order to fund projects that they could not otherwise fund,” said WILL’s President and General Counsel Rick Esenberg. “By doing so they will raise the price for all taxed products and services in Brown County, increase the cost of living, and place an additional burden on vendors and consumers. We have laws for a reason, and the reason for Wisconsin’s tax levy limits is to ensure political subdivisions like Brown County do not have unbounded authority to tax their residents.”
Post updated 1/3/2018 2:00 p.m with additional comments from Rick Esenberg and Attorney Andrew Phillips
Media Trackers Director of Communications Jerry Bader interviewed both Esenberg and Attorney Andrew Phillips of Von Briesen & Roper who is representing Brown County, who both provided more insight to the argument and defense of the imposition of the sales tax. Philips defended against Esenberg’s claims:
“Essentially when you look at the policy reasons and the legal reasons for the sales tax Brown County is in a position that frankly 65 other counties that have the sales tax are in, and that is that it’s not a simple equation of dollar for dollar offset on property tax revenue. What you have to understand is that when you talk about they levy limit, one of the things that falls outside of the levy limit calculation is debt service payments, and so a county like Brown County is faced with looking at infrastructure needs and borrowing money to pay for those infrastructure needs, and debt service on that money borrowed is not part of the levy limit.”
“It’s my understanding that the sales tax is actually going to offset the debt service which otherwise would fall outside the levy limit so it is actually reducing the property tax burden on Brown County property tax payers and so from that stand point it is a direct offset.”
“The fact of the matter is that you can’t simply choose to borrow money, the state law has an elaborate set of processes that is designed to protect the taxpayers that you have to go through in order to borrow money. You have a referendum, you have to have a super majority, and to say that well we could have done that but we chose not to do that, we chose not to jump through those hoops in order to borrow the money, but you should act as if we had and therefore treat this as a direct reduction of the property tax. It seems to me inconsistent with the law, and once again just as Attorney General Doyle’s opinion did, leaves the limitation out of the statute.”
“Brown County has the bonding capacity of about a billion dollars, I think its current indebtedness is about 118 million. If it was possible for counties to impose sales taxes by simply waving their hands and saying well we could borrow the money, we didn’t, we didn’t go to the tax payers and ask for permission, we didn’t comply with the requisites for borrowing money under state law but we could have, then that limitation that is in the law on the imposition of a sales tax has essentially been rendered meaningless because then every county will always be able to say well we could have borrowed the money.”
WILL is seeking a temporary injunction to keep the tax from being collected.