cash registers from local property tax
A provision in the state biennial budget proposal currently before Gov. Scott McCallum would exempt cash registers and fax machines from local property tax.
Some of the machines are already exempted. A similar provision in the 1997-1998 budget contained an exemption for computers and computer-related equipment. According to information supplied by the Wisconsin Department of Revenue, this includes fax machines that are part of a printer or scanner — as well as cash registers that are tied into a business’s computer system.
According to Rick Olin of the Wisconsin Legislative Fiscal Bureau, the computer exemption — in the current fiscal year — reduced business’s taxes by about $74 million. The cash register/fax tax exemption would provide further relief.
“We think the two provisions together would probably exempt about $200 million in value,” Olin said of the combined fax and cash register exemptions. “We don’t have a real precise estimate. The exemption would not take affect until 2003. If you are at $200 million in value, however, given average tax rates, you are looking $4.3 million in taxes.”
Avoid cost shifting
Critics of the computer exemption stated that the exemption would increase local property taxes, shifting the burden to homeowners. But Olin said those concerns were addressed through increased state aid to municipalities.
“The state would make an aid payment equal to the tax that would otherwise be paid,” Olin said, adding that a similar provision was included in the cash register/fax tax exemption proposal.
“Normally, when the legislature enacts a property tax exemption, property tax gets shifted from the owners of exempt property to those not exempted,” Olin said. “With the computer exemption, the legislature worked out a hold harmless clause. The state calculates an aid payment equal to the lost property taxes.”
The question of who pays the additional state taxes necessary to pay for the additional state aid is harder to figure out, according to Olin.
“The owners of the exempt property are clearly benefiting,” Olin said. “On the other hand, the state has to get the money from somewhere. Some people may be paying for the exemption in additional state taxes. But do I think it is a wash? No.”
Proposal with a history
The idea behind exempting computers and fax machines has a long history. In 1996, Gov. Tommy Thompson formed a Blue Ribbon Commission for Jobs in the 21st Century to identify ways to stimulate economic development. The commission came back with the recommendation for the computer exemption. Soon Wisconsin joined neighboring states Illinois, Iowa and Minnesota in excluding computers and related equipment from property and ad valorem taxes.
But a subsequent Thompson administration push to have fax machines and cash registers included in the exemption faced a rockier road.
“What happened was the property tax exemption was enacted as part of 1997 Act 237 — and passed in 1998 for the 1999 tax year,” Olin said. “In the next budget — the 1999-2001 biennial budget, the Governor proposed to extend that exemption and exempt cash registers, fax machines and copiers. This was not adopted by the legislature in the last budget.”
This time around, Olin said the provision was placed back into the budget by the conference committee.
“It grew out of the recommendation from the last budget,” Olin said.
Aug. 17, 2001 Small Business Times, Milwaukee
