Too Personal

This is that magical time of year where we start to think of giving to others. And just after we’ve maxed out our credit cards on Black Friday, our real estate tax bill arrives in the mail.

Many Wisconsin businesses, however, get two bills – one for their real estate and one for their personal property.

For example, in addition to our real estate taxes, our law firm also pays a property tax on things like office furniture and equipment. Other businesses are taxed on things like machinery or tools.

The personal property tax was first implemented in Wisconsin in the 1830s, before we even became a state. At that time, there was no income or sales tax. Government funding came primarily from property taxes – not only from land and buildings, but also from possessions like jewelry, furniture and livestock.

The initial personal property tax was tricky, however. If the assessor came to your house, but your valuables were stuffed under the floorboards or your mattress, they’re much harder to tax. Likewise, establishing value was difficult for older items, such as a used mattress.

So, over the last two hundred years, more and more items were removed from the list of personal property that would be taxed, starting with things like wagons and carriages in the 19th century to computers in the 21st.

Starting next year, however, the personal property tax is going away for good.

This past summer, Governor Tony Evers signed legislation eliminating the personal property tax. The bill to repeal the tax was sponsored by Representative Tony Kurtz and Senator Mary Felzkowski. The law goes into effect for the January 2024 assessment, meaning when our office gets our property tax bill in December of 2024, it will just be for our real estate.

Governor Evers’ office indicated that the personal property tax created a financial burden for businesses, especially smaller ones, and complicated tax compliance. So, the repeal of the tax aims to promote business growth, foster innovation, stimulate economic activity, and alleviate the burden on small businesses.

But, as is normally the case, the government giveth, and the government taketh away. Previously, improvements on leased land were assessed as either personal property or as real property. Under the new law, buildings, improvements, and fixtures on leased lands must be assessed as real property starting on January 1, 2024.

The money generated by the personal property tax typically benefited local governments. According to the Wisconsin Department of Revenue, real estate taxes generated $12.5 billion in 2022. Comparatively, the personal property tax only brought in about $174 million.

While I recognize that the personal property tax brings in only 0.014% of the real estate tax, $174 million still feels like a lot of money that will no longer be available to our hometowns. To offset this loss, the state plans to distribute an additional $207 million to municipalities and $68 million to counties on an annual basis.

I’m glad the personal property tax is going away. I’ve been complaining about paying taxes to my accountant for years, but he always reminds me it’s accrual world.

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Reg P. Wydeven

Elder Law and Estate Planning Attorney at McCarty Law LLP
Hoping to follow in his father’s footsteps from a young age, Reg’s practice primarily consists of advising individuals on estate planning, estate settlement and elder law matters. As Reg represents clients in matters like guardianship proceedings and long-term care admissions, he feels grateful to be able to offer families thorough legal help in their time of need.

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