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Freeze on property taxes gains support

State budget panel also favors limiting tax credit for poor

By Jason Stein of the Journal Sentinel

Madison — In the tightest limits yet in Wisconsin, property taxes would be essentially frozen for two years and then placed under tight permanent caps, under a budget proposal advanced by GOP lawmakers Thursday.

On a 12-4 party-line vote, the Joint Finance Committee largely stuck with Gov. Scott Walker's budget proposal and approved freezing property taxes for counties and municipalities for two years with growth in the levy limited to the value of new construction.

In the following years, taxes would be limited to either 1.5% a year or the value of new construction, whichever is higher.

Republicans on the budget committee also blocked automatic increases in a property tax relief program for low-income residents and seniors.

"What we are doing today for the first time is we are putting into place a permanent property tax control mechanism," committee co-chairman Rep. Robin Vos (R-Rochester) said.

The Senate and Assembly both have to vote on the budget bill in the coming weeks and could still make changes.

The permanent property tax caps were the main difference with Walker's 2011-'13 budget proposal, which would allow the caps on local tax levies to expire after 2012. In another change from the Republican governor's proposal, communities would be able to modestly increase their property taxes by an added amount if they hadn't raised those taxes in previous years by the full amount allowed under the state limits.

Usurping local control?

But Democrats said that Republicans were telling local elected officials how to run their own communities and keeping them from investing in their infrastructure.

"What right do you have to tell the City of Superior, the city council and mayor, what level their property taxes are?" Sen. Bob Jauch (D-Poplar) asked. "The Republican majority wants to tell local governments what's good for them."

Sen. Joe Leibham (R-Sheboygan) said the tax limits would help attract jobs and ensure families can pay their bills.

He said communities can still exceed the levy limits by a referendum.

"I think it's reasonable for us to put those controls on the issue of property taxes, but in the end this isn't 'Madison knows best,' " Leibham said.

By limiting property tax growth largely to the rate of new construction in the midst of a difficult real estate market, Republicans are keeping a tight lid on property taxes.

Net new construction increased property tax values in the state by only 0.8% in 2010, according to the nonpartisan Legislative Fiscal Bureau.

Under the changes by the Joint Finance Committee, local governments could carry over any unused amounts from their tax limits into the next year as long as it didn't increase taxes by more than 0.5% of the total levy. That change would make the Joint Finance limits slightly looser than those proposed by Walker.

Under Walker's limits, the owner of a median-value $158,000 home in the state with a tax bill of $2,963 would see property taxes rise by just $36, or 1.2%, over two years, to $2,999, according to projections by the fiscal bureau.

Homestead tax credit: In another 12-4 party-line vote, the committee also froze the homestead tax credit - a change proposed by Walker that would cost qualifying residents $13.6 million over two years.

The long-standing property tax break appears as a credit on income tax returns for low-income homeowners and renters.

In 2009, Democrats indexed the income threshold for the tax credit for inflation, but Walker's plan would end that practice and freeze the threshold for the credit at its existing income level.

Democrats said that Republicans had "skewed priorities" for blocking the increase in the credit while approving tax breaks for corporations and other businesses.

"This isn't for the wealthy. This is for individuals who have very, very small incomes," said Sen. Lena Taylor (D-Milwaukee).

Vos questioned whether everyone receiving the credit truly needed it, saying that a college student renting an apartment could qualify for the credit.

In other action, the committee approved:

• Providing $5 million in tax dollars next year to help prop up the struggling state Veterans Trust Fund, which pays for personal loans and grants to veterans and other programs. But even with that help, the trust fund is projected to go into the red during the 2013-'15 budget. The fund would be more than $20 million in the hole by June 30, 2015, according to the fiscal bureau.

• Cutting $764,100 in funding a year for a statewide mandate to collect data to track possible racial profiling by police in making traffic stops.

• Cutting $2.5 million a year in aid to help the poor with legal cases in civil court.

• Providing about $800,000 a year to restore some funding for the Wisconsin Justice Information Sharing program, which helps law enforcement agencies around the state share case files. Walker had sought to eliminate funding for the system.