Everyone now knows the state is facing a large budget deficit heading into the next budget cycle. The Legislature will, without question, pass some “revenue enhancers” (otherwise known as “tax increases”) to fill in some of the hole.
In making their case for higher taxes, Democrats in the majority will reach for the easiest tax increases they can find. They’ll pick the low-hanging fruit, usually in the form of sales tax exemptions. (A full list of exemptions can be found in chapter 77.54 of the state statutes.) For instance, clay pigeons are exempt from sales taxes, as are dog haircuts. So Democrats will give the public the impression that all we have to do is extend the sales tax to your puppy’s hairstylist, and presto! – budget problem solved.
Perhaps the most entertaining of these exemptions is the tax break for the purchase of bull semen. That’s right – semen purchased for inseminating livestock is tax-free. So it appears I’m going to stock up on bull semen before the Legislature starts taxing it and it gets too expensive. This actually sounds like a pretty good deal for bulls around the state – with their seed in such high demand, they’ll start getting crateloads of adult bull materials delivered to their pens. (Insert your own “beef stroganoff” joke here.)
Unfortunately, as one of my colleagues quipped, “this budget will not be solved on clay pigeons and bull semen alone.” Each budget, the Wisconsin Department of Revenue issues its Summary of Tax Exemption Devices, which details how much each exemption saves consumers. According to the DOR, the semen exemption shorted the state by $2.7 million in FY 06. The clay pigeons exemption “cost” the state $200,000. If legislators are looking to plug a chunk of the $5.4 billion budget hole by eliminating sales tax exemptions, they’re going to have to go after the big boys.
And what are the big ticket items? Well, physicians and dental services are currently exempt, which saved consumers $495 million in 2006. Eliminating this exemption makes health care more expensive for everyone in the state. Food sales tax exemptions saved consumers $550 million. The prescription drug plan cost the state $116 million. Eliminate this exemption, and the senior groups might burn the capitol to the ground. Sales of items to local school districts exempted $295 million – undo this exemption, and property taxpayers will have to pick up the tab for their school districts’ higher costs.
So while we can have fun nitpicking all the goofy tax exemptions within the code, the only substantive progress can be made by eliminating the really large exemptions. And these exemptions are large for a reason – millions of people of modest means take advantage of them. And that’s no bull.