July 25, 2016
by Nick Novak
This column was originally published by The Daily Reporter.
Imagine purchasing a new lawn tractor as a homeowner. Upon buying it, you’d expect to pay the state sales tax according to the price — or value — of that purchase.
Now imagine that you had to pay an additional tax on that tractor every single year until you got rid of it. That sounds a little excessive, doesn’t it?
Luckily, Wisconsin eliminated the tax on homeowners’ personal property a long time ago. So this won’t happen the next time you purchase a John Deere.
Some businesses are even privileged enough to be exempt from the personal-property tax. Yet, there are numerous industries that are stuck paying the tax simply because they were not special enough to get one of the more than 50 exemptions to the law that are on the books.
I know what you are thinking. There must be solid and logical reasoning behind each exemption, right? Think again. Under the law, youth baseball associations are exempt from paying personal-property taxes on their equipment, but youth soccer associations are required to pay it. Try to explain that one.
As it turns out, the construction industry is in the same boat as youth soccer. Much of the equipment used to literally build Wisconsin’s economy is subject to the personal-property tax, and it can get quite expensive.
How expensive? Picture a brand-new piece of equipment worth $200,000. If a contractor purchased it in 2015, it would have been subject to the state’s 5.5 percent sales tax — adding another $11,000 to the final bill.
That is not enough for the government, however. The contractor was also subject to personal-property taxes that year based on a formula set by the Department of Revenue. At the average property tax rate of $19.91 per $1,000 of value, the contractor would owe another $3,683 in personal property taxes just for 2015.
Over the next 10 years, as it is depreciated at a preset amount, the contractor would have to pay an additional $17,385 in personal property taxes — on just one piece of equipment. In total, the contractor would be on the hook for more than $32,000 in taxes from 2015 to 2025, which is an effective tax rate of more than 16 percent on the original purchase.
The taxes do not stop there, though. In the 11th year of owning a piece of equipment, the government determines the value to be 13.9 percent of the original purchase price. That means, as long as the contractor owns the equipment, it will be taxed in some way, shape or form. Even if the actual value drops to zero, the personal property tax never will.
Continue reading at DailyReporter.com.