For the first time since Wisconsin enacted a state sales tax in 1962, sales tax revenues have not increased from the previous fiscal year.
According to a report from the Wisconsin Department of Revenue, state sales tax revenues declined by 4.3 percent from last year, bringing the state approximately $4.08 billion in revenue this fiscal year.
Currently, the state sales tax is 5 percent of the amount of a purchase. Counties can also add their own sales tax percentage on top of the state sales tax.
Andrew Reschovsky, UW professor in the Lafollette School of Public Affairs, said the sales tax revenue dip is not a shocking occurrence.
“The revenue decrease is not unexpected in the slightest,” Reschovsky said. “We have known that the economy has slowed and consumer sales have been reduced.”
According to Reschovsky, the consensus of macroeconomists is the economy has hit bottom and will improve, but it will do so at a modest pace, translating into modest increases in sales tax revenue.
“Unemployment will get worse before better and people are worried, so purchases are put off and building projects are put off,” Reschovsky said. “I think there is a good reason to suspect there will be no big increase.”
Reschovsky also said economists in the DOR are looking at complicated models and making the best predictions, but there will be implications for the state’s ability to fund certain programs in the next biennium’s budget.
Bob Lang, director of the Legislative Fiscal Bureau, said the LFB anticipated a decline in sales tax revenue when constructing estimates for the biennium budget earlier this year.
“We did our revenue estimates in May, and we anticipated a decline,” Lang said. “Our estimate was pretty much right on target with what [the revenue shortfall] was, and we already incorporated it into the budget.”
Lang added he thinks the sales tax revenue may decrease even more next year.
Finance Committee Co-Chair Rep. Mark Pocan, D-Madison, said in an e-mail the state’s economic condition is a direct reflection of the national problem.
“The national economy has had a dramatic impact on the state budget, and one place this has shown up is declining sales tax revenue,” Pocan said. “We’re hopeful the economy will rebound soon and consumer confidence will follow.”
Rep. Robin Vos, R-Racine, said the decreased sales tax revenue proves the state is facing a serious financial problem. According to Vos, the only way to make the situation better is to grow the economy, and the Democrat’s tax increases are just going to make a bad situation worse.
Vos agreed the revenue shortfall was anticipated by the Joint Finance Committee and reflected in the budget, but added the state is only a few months into the budget and the revenue could drop still lower.
“I’m cautiously optimistic … but fearful that tax increases will hurt the sales tax revenues more,” Vos said.