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Citing stagnant revenue from the state and an increasing financial pinch, Milwaukee-area leaders are pushing the state to sign off on a 1% county sales tax.
The move, which could bring in as much as $160 million per year, would raise the sales tax in Milwaukee County to 6.5%. Officials want to introduce a binding referendum allowing residents to decide on the tax increase themselves, but in Wisconsin the Republican-controlled Legislature must also sign off on the plan.
"In many, many other states, you’ve got different treatment for the largest metropolitan area," Barrett said in his Sept. 15, 2019 appearance. "We are, the last time I checked, the only city in this country with a population of over 400,000 that doesn’t have either a sales tax or a local income tax. We are just hamstrung because of the rules of the state."
So Barrett is making the general case that Milwaukee has less flexibility than its peers, while specifically claiming no other city of its size gets by without a local tax of some kind.
We’ll examine both of those.
The first element of Barrett’s claim is that Milwaukee doesn’t have the same options for raising tax revenue as other large cities.
For more than a century, Wisconsin has used state income and sales taxes to provide aid — called shared revenue — to local governments, while generally not allowing local governments to levy those taxes themselves, according to the Wisconsin Policy Forum, a nonpartisan research group. The main exception is a half-cent "piggyback" sales tax counties are allowed to levy on the same items taxed by the state. Other exceptions include stadium districts.
The current sales tax throughout Milwaukee County is 5.6%, which includes a 5% state sales tax, a 0.5% county sales tax (since 1991) and a 0.1% stadium tax for Miller Park (since 1996). The stadium tax is expected to end by next year.
Many other states don’t have such an oversight requirement, giving local government the freedom to make independent decisions on tax increases.
In Hillsborough County, Florida, which includes Tampa, voters passed two referendums in late 2018 that raised sales taxes by 1.5 cents on the dollar for transportation and schools.
The Albuquerque City Council voted in 2018 to impose a three-eighths cent tax, raising about $52 million per year.
The large Hennepin and Ramsey counties around the Twin Cities voted to levy a half-cent sales tax for transportation in 2017, raising about $100 million annually between the two counties.
But not all states have such a system.
The Urban Institute-Brookings Institution Tax Policy Center, an independent group that models the effects of tax legislation, reports 37 states allow local governments to impose their own general sales taxes.
Wisconsin is tricky to categorize.
Counties may choose to adopt the 0.5% county sales tax, but not all of them do. The state Department of Revenue reports Manitowoc, Menominee, Outagamie, Racine, Waukesha and Winnebago counties have no county sales tax.
The Tax Policy Center lists Wisconsin among the states that allow local sales taxes. But a 2017 report from the Wisconsin Policy Forum (then the Public Policy Forum) listed Wisconsin among the states with no local sales tax power, since only counties have that ability and it’s capped at 0.5%.
That policy forum report noted this has caused increasing problems in Milwaukee:
"Wisconsin’s strong state aid historically has compensated for the lack of local revenue diversity. However, cutbacks in shared revenue have diminished this program’s purchasing power and required Milwaukee to lean heavily on increased property taxes and fees to offset the impact."
A 2019 policy forum report said stagnant shared revenue combined with state caps on property taxes has led to mounting questions about "whether local officials can sustain appropriate service levels in areas such as public safety, streets, libraries and parks."
This brings us to Barrett’s more specific claim — that Milwaukee is the only city of 400,000 or more in the nation without a local sales or income tax.
The 2017 report from the Wisconsin Policy Forum compared Milwaukee to 38 peer cities around the country. They reported 30 of those cities had a general local sales tax, and the remaining eight each drew revenue from a "selective sales taxes and/or other forms of taxation besides the property tax."
That report excluded cities like Indianapolis and Boston from the comparison since they have different funding mechanisms than Milwaukee. Indianapolis performs some typical county functions, and Boston has school district funds pass through its budget.
We asked Barrett’s office for details on where his claim originated, and they forwarded us to Jeff Fleming, a spokesman for the Milwaukee Department of City Development. He said Barrett’s claim was based on that policy forum report.
But Barrett referred to cities by size, not to the limited peer group in the study. And that makes a difference.
Boston has a population well over 400,000 and does not have a local sales tax or income tax, according to an August 2019 report from the Tax Foundation, a think tank that generally has a pro-business leaning.
We’ll assume Barrett was referring to cities that don’t levy their own local sales tax, since otherwise Milwaukee wouldn’t meet his criteria given that city residents are subject to the county’s local sales tax.
And in that case other cities join Boston on the list of exceptions to Barrett’s claim.
Indianapolis does not levy its own sales or income tax, but Marion County imposes a local income tax there, according to the Tax Foundation. And Portland, Oregon, has no city-issued sales or income tax, but residents there pay an income tax to a regional transportation district.
Barrett said Milwaukee faces unusual taxing challenges and is "the only city in this country with a population of over 400,000 that does not have a sales tax or local income tax."
Barrett is essentially on target with the general claim that Milwaukee is in the minority nationally. Wisconsin is one of about a dozen states that authorizes cities to assess only property taxes — not sales or income taxes.
But his core statistical claim is wrong. Several other cities larger than 400,000 do not impose their own sales or income tax.
We define Half True this way: "The statement is partially accurate but leaves out important details or takes things out of context."
That fits here.
WISN-TV, 'UPFRONT' recap: Milwaukee mayor talks about sales tax increase proposal, Sept. 15, 2019
The Tax Foundation, Sales Tax Rates in Major Cities, Midyear 2019, Aug. 14, 2019
The Tax Foundation, Local Income Taxes in 2019, July 30, 2019
Interview and email exchange with Jared Walczak, director of state tax policy, The Tax Foundation, Sept. 16, 2019
Wisconsin Department of Revenue, Tax Rates FAQ, accessed Sept. 16, 2019
Milwaukee Journal Sentinel, The Miller Park stadium tax has been in place for 22 years. It will likely end next year, March 12, 2019
Wisconsin Legislative Fiscal Bureau, Local Government Revenue Options, January 2015
Tax Policy Center, How do state and local sales taxes work?, accessed Sept. 17, 2019
Public Policy Forum (now the Wisconsin Policy Forum), On the Money? The City of Milwaukee’s uncommon revenue structure and how it compares to peer cities, July 2017
Wisconsin Policy Forum, DOLLARS AND SENSE: Is it time for a new municipal financing framework in Wisconsin?, February 2019
Email exchange with Jodie Tabak, spokeswoman for Tom Barrett, Sept. 16-17, 2019
Email exchange with Jeff Fleming, spokeswoman for the Milwaukee Department of City Development , Sept. 17, 2019
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