Property tax exemptions can be granted to small businesses that move into Milwaukee County.
Chris Abele on Monday, January 31st, 2011 in a campaign news release
Milwaukee County executive candidate says property tax exemptions can be granted to small businesses that move into the county
When political newcomer Chris Abele rolled out a job creation plan in January of 2011, he spiced it up with a tax break for new small businesses in Milwaukee County.
The philanthropist and candidate for Milwaukee County executive described it as a limited-time reward that would roll out the welcome mat for employers.
"What a county can do...is a property tax grace period for net new jobs," he told reporters.
His campaign added this in a written statement: "Chris will grant a short-term property tax exemption for new small business start-ups based on new net jobs created in Milwaukee County."
The idea caught our attention because legal hurdles to such tax breaks are steep and well known.
Can Abele really do as his plan claims?
And, if it does pass legal muster, can the county executive do it himself?
We asked Abele press aide Brandon Lorenz for answers. He described the idea as bare bones, saying Abele has not fleshed out how it would work or explored all the legal angles.
But the tax, legal and legislative experts we talked to said Wisconsin’s state constitution and various state Supreme Court cases create major barriers to these kinds of special property tax exemptions.
The assessment from experts: Abele’s proposal almost certainly isn’t going to fly.
And there’s no way Milwaukee County can do it alone.
The central point in the analysis of Abele’s plan is the "uniformity clause" in the Wisconsin state constitution.
The clause was "intended to prevent the legislature and local officials from granting preferential tax treatment to influential property owners and protect the citizen against unequal, and consequently unjust taxation," according to a 2002 Wisconsin Legislative Reference Bureau paper.
The author of that paper, reference bureau attorney Joseph Kreye, said Abele’s plan almost assuredly would run afoul of uniformity, and would almost certainly draw lawsuits from existing businesses that don’t get the tax break.
Kreye is the attorney who checks state bills for compliance with the uniformity clause.
Todd Berry, president of the Wisconsin Taxpayers Alliance, a nonpartisan research group, agreed.
"If you are going to pick property tax payers and you favor some and not others, even though they are the same – both business, both homeowners or retail stores – the constitution says you can’t do that," Berry said.
Municipalities, such as Milwaukee County, are particularly hamstrung.
A League of Wisconsin Municipalities paper on the uniformity clause put it bluntly.
"Can a municipality grant a full or partial property tax exemption to a property owner or a business? No."
The state Legislature can classify and exempt whole classes of property -- such as agriculture -- from uniform taxation, the League’s paper noted.
It added (italics ours): "Unlike the state, municipalities do not have the power to create full or partial exemptions and a municipality may not lawfully grant a property tax break because such action would violate the uniformity clause of the Wisconsin Constitution. Thus, the assessment of property cannot be frozen as an incentive for businesses to locate in a community."
Abele’s spokesman told us it’s at least theoretically possible his plan could get around that.
It’s possible, Lorenz said, that Abele would try to define "new small businesses" as a special class of property. If a legal challenge resulted, there’s a chance the county could prevail, Lorenz said.
But Kreye said that while the Legislature could exempt whole classes of property from taxation, carving out certain businesses within one class for special treatment is problematic.
Abele’s camp offered one more defense.
Lorenz said that Abele thought of his plan as a county version of Gov. Scott Walker’s plan for a two-year income tax break for firms that relocate to Wisconsin. Walker signed that bill on Jan. 31 -- and legal concerns were not an issue.
But Walker’s plan involves income taxes, not property taxes.
The uniformity clause "does not apply to income taxes," said state Legislative Reference Bureau attorney Marc Shovers, an income tax specialist.
This one’s clear.
Abele is touting his idea of granting special property tax breaks to certain businesses. But well-established legal principles, the state’s constitution and expert opinion strongly suggests that not even the Legislature could make this happen.
The lack of detail in Abele’s plan may be the best thing going for it, because it’s harder to judge. But it also makes clear how far off base he was in presenting this as a simple matter of a pen stroke by the new county executive.
We rate his statement False.
Published: Wednesday, February 9th, 2011 at 9:00 a.m.
Interviews with Brandon Lorenz, Abele press spokesman, Feb. 2-3, 2011
Interview with Marc Shovers, Wisconsin Legislative Reference Bureau staff attorney, Feb. 2, 2011
Interview with Jon Peacock, director, Wisconsin Budget Project, Feb. 3, 2011
Interview with Joseph Kreye, senior attorney, Wisconsin Legislative Reference Bureau, Feb. 4, 2011
Interview with Todd Berry, president, Wisconsin Taxpayers Alliance, Feb. 1, 2011
Chris Abele, video of tax announcement,Jan. 31, 2011
Chris Abele, campaign news release, Jan. 31, 2011
Wisconsin Legislative Reference Bureau, The Uniformity Clause, 2002
Wisconsin League of Wisconsin Municipalities, Taxation FAQ 7, accessed Feb. 2, 2011
Wisconsin Budget Project, Property Tax Relief in Wisconsin: The Uniformity Clause, accessed Feb. 2, 2011
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