Wisconsin’s State and Local Tax Burden Still Near Historic Low

January 2024


State and local tax collections rose slowly in the state’s 2023 fiscal year while the growth in state residents’ income also slowed, leaving little change for Wisconsinites in their ability to pay their tax bills. Revenues from certain taxes – including those on corporate profits and vehicle ownership – dropped last year. With the tax burden near a historic low, its future course depends on factors such as inflation, a new state budget, and the trajectory of the national economy.

After falling in 2022 to the lowest level in more than a half century, the ratio between what Wisconsin residents pay in state and local taxes and what they receive in income essentially held steady last year. This ratio – known as the state and local tax burden – rose slightly in 2023 to an even 10.0%, up from 9.96% in the year prior (see Figure 1).

Local tax revenues in Wisconsin (including property taxes) rose 3.2% in fiscal 2023, which ran from July 1, 2022 to June 30, 2023. Meanwhile, revenues from state taxes such as income taxes grew 2.1%. State and local tax collections combined rose 2.5% to $36.23 billion, up from $35.36 billion in 2022. The growth in state and local tax collections in 2023 was lower than the 4.1% increase in 2022 and 7.2% rise in 2021.

Each year, the Wisconsin Policy Forum gathers data from various state agencies to give a complete picture of every local and state tax paid, ranging from those as small as the state bingo tax ($177,000 in 2023) to those as large as gross local property taxes ($12.51 billion). We then compare tax collections to state personal income data from the calendar year before. These figures from the U.S. Bureau of Economic Analysis are the most recent available and include income from a wide range of sources including wages, salaries, interest, dividends, and transfer receipts of individuals who live in the state.

By comparing calendar year 2022 income data to fiscal year 2023 tax data, we arrive at statewide tax burdens. Growth in personal income also slowed in the most recent year to 2.0% – matching national growth – as both inflation and the overall economy cooled from their overheated growth coming out of the pandemic. The result was a very modest increase in the tax burden.

With some exceptions, state and local tax burdens have been steadily decreasing in Wisconsin over the last 50 years. For each of the last nine years, state and local taxes have comprised less than 11% of personal income, which was not true of any other year in our records going back to 1970. Additionally, after two straight years of rapid growth, federal tax collections are projected to decline by 1.8% in 2023, leaving the overall tax burden for all levels of government at 29.1% of personal income.

Readers should note that these figures represent the average share of income in Wisconsin going to pay tax bills for all state residents. As a result, this brief will not reflect every individual’s experience, but is rather meant to analyze trends for Wisconsin as a whole. The interactive chart (Figure 2) allows readers to analyze trends for every state and local tax since 2000.

State Taxes

After substantial increases in recent years, the growth in state tax collections cooled last year. Total state tax revenues rose by 2.1% from $23.78 billion in 2022 to $24.27 billion in 2023, which was a slowdown from the preceding two years. Combined, revenues from the three largest state taxes – individual income, corporate income, and sales, which together account for more than 80% of all state tax dollars – grew by 2.4% in 2023, the least since 2020 (see Figure 3).

In 2022, the $1 billion income tax cut signed into law as part of the 2021-23 state budget had the effect of lowering income tax collections despite significant personal income growth. The 2023-25 budget includes additional income tax reductions but they are relatively modest since Gov. Tony Evers used his partial veto pen to substantially reduce the massive tax cut originally approved by GOP lawmakers.

The state tax burden in 2023 stayed exactly the same at 6.70%. That makes each of the last two years tied for the lowest state burden in the Forum’s more than 50 years of data.

Individual Income Tax

Individual income taxes in Wisconsin rose by 2.2% in 2023 to $9.41 billion, up from $9.21 billion last year. Leaving aside years in which the state enacted a significant income tax cut (2014, 2022) and the year the pandemic impacted the incomes of state residents (2020), the 2023 growth in individual income taxes is the slowest since the state was recovering from the Great Recession.

As the economy decelerated, personal income levels rose just 2.0% in calendar year 2022, the slowest rate since 2016. Much of the wage gains for workers in Wisconsin were accrued in 2021, when inflation skyrocketed and personal income rose by 8.6%, the most in a single year since 1990.

Next year, Wisconsin residents will experience another income tax cut, albeit one that is much smaller, as the state budget approved in July lowers the rate for the state’s second tax bracket from 4.65% to 4.4% and the rate for the lowest bracket from 3.54% to 3.5%. The Legislative Fiscal Bureau estimates that these measures will lower state tax collections by $86.8 million in 2024.

Corporate Income Tax

Corporate income taxes dropped by 7.1%, from $2.96 billion in 2022 to $2.75 billion in 2023. These monies are collected on a 7.9% tax on profits of companies attributable to the state of Wisconsin.

2023 is the first year since 2018 in which corporate income tax collections fell. At that time, lawmakers altered state law on individual and corporate income taxes in reaction to the federal Tax Cuts and Jobs Act. The combined effect of the state and federal law changes was more income being reported at the corporate level rather than passed through to shareholders for them to pay individual income tax on those profits. The state also boosted its auditing function, which likely further contributed to corporate income tax collections.

From 2018 to 2022, corporate income tax collections more than tripled. The decrease this past year likely reflects in large part a slowing economy and the effect of rising interest rates.

Sales Tax

Sales tax collections in 2023 grew by 6.8% to $7.46 billion. This is the third straight year in which sales taxes grew by more than 6% after not doing so even one time since 2000.

The explanation for this increase is straightforward. As the economy has grown and inflation remained relatively high, the cost of consumers’ bills in checkout lines around the state has grown and sales tax collections have risen apace.

Sales tax collections are likely to moderate moving forward as inflation slows, though they will also depend in part of the overall strength of the economy.

Excise Taxes

Total state excise taxes on cigarettes, tobacco, vapor products, liquor, wine, and beer declined by 5.6% in 2023, the largest drop in a single year since at least 1980. Excise tax collections have fallen in each of the last three years and six out of the last seven, which largely reflects a decrease in cigarette purchases.

The majority of excise tax collections come from a $2.52 tax on each pack of cigarettes. In January, we found that the combination of rising state and federal cigarette taxes, state bans on smoking in certain areas, the rise in vaping, and the growing availability of cessation products have decreased the number of packs of cigarettes sold in Wisconsin, with the total dropping by more than half since 2001. In 2023, the state collected $444.7 million from cigarette taxes, a 7.8% decline from 2022 that was also the largest in a single year since at least 1980.

Tax collections on beer fell by 6.9% to just $8.3 million, the lowest level since 1972 even without adjusting for inflation. This decrease likely reflects at least in part the rise in hard seltzer drinks. Liquor and wine tax collections rose by 6.9% to $69.4 million.

Excise taxes on vaping products rose substantially, by 71.2% from $4.1 million in 2022 to $7.1 million in 2023. The tax equals five cents on each milliliter of the liquid used in vaping products and was passed into law as part of 2019 Wisconsin Act 9.

Transportation Taxes

Last year saw a decrease in the state revenues that are set aside for funding state and local roads and other transportation infrastructure. Combined collections from the state gas tax, vehicle registration fees, driver’s license fees, and limo and car rental fees dropped for just the second time in the last 40 years, falling by 1.2% in 2023 to $2.06 billion. While limo and car rental collections increased, they make up a very small proportion of this total; the other three types of taxes all declined (see Figure 4).

Gas tax collections declined only slightly, dropping from $1.11 billion in 2022 to $1.10 billion in 2023, a decrease of 0.8%. Because this tax is imposed on each gallon purchased rather than as a percentage of the sale price, the total revenues reflect a decrease in gas consumption. The rise in gas prices in 2023 as well as ongoing improvements to vehicle fuel efficiency and the expansion of electric vehicles are likely contributors to this slight decline.

Wisconsin also places fees on vehicle registration and titling, and driver’s licenses, both of which declined in 2023. Car prices have surged, and that may represent one factor in this decline as many consumers may simply be waiting to replace their vehicles.

Real Estate Transfer Fee

Amid one of the hottest housing markets in recent memory, state collections from the real estate transfer fee – $3 for every $1,000 in value of real estate property sold – hit highs in 2021 and 2022. This fee is collected by counties and then split up, with the state receiving 80% of collections and counties receiving the other 20%.

State collections rose to $106.1 million in 2021 and $121.4 million in 2022, but declined by 18.6% to $98.8 million in 2023 (see Figure 5). Still, even adjusting for inflation, 2023 real estate transfer fee collections are the highest in any year besides the last two since 2007. The signs point to a housing market that is cooling, but still potent.

Local Taxes

Revenues to support local services in Wisconsin grew at a faster rate last year. Local tax collections rose by 3.2% in 2023, more than the increase of 2.0% in the previous year but still in line with those in 2020 and 2021. This year marks the fourth straight year of local tax collections rising by at least 2% after staying below that in each year between 2012 and 2019. The local tax burden rose slightly, up to 3.30% from 3.26% in 2022.

Property Taxes

Property taxes – the key local funding source for most public services in Wisconsin – continued to grow slowly. General property taxes rose by 2.4%, from $12.21 billion in 2022 to $12.51 billion in 2023. Since 2011, municipalities, counties, and technical colleges generally have only been allowed to raise property taxes each year for operating purposes by the rate of net new construction within their jurisdiction (or new construction as a share of total property value).

School district property tax increases are also capped by the state. They are tied to the per pupil revenue limit set by the state budget, which for the 2023 school year did not include an increase. As school districts make up the largest share of local property tax collections, annual changes in overall property taxes are tied closely to what has happened with the school revenue limits as well as certain other factors such as state aid to schools.

For example, since 2016, the per pupil revenue limit only increased in 2020 and 2021. In those years, overall local property taxes rose by 3.7% and 3.4%, respectively. In each of the other years since 2016, including 2023, local property tax increases have been below 2.5% (see Figure 6).

Because of these state limits, local property tax collections do not necessarily line up well with broader economic trends. Though inflation is slowing, increases to property tax collections in each of the last few years have not kept up with the rise in consumer prices and the cost of government services.

The state provides credits to taxpayers to reduce net property tax bills. These three credits – the school levy tax credit, the lottery credit, and the first dollar credit – lowered bills for local taxpayers by 1.6% less in 2023, with the total amount of credits declining from $1.43 billion in 2022 to $1.41 billion this year. The school levy credit stayed flat at $940 million and the first dollar credit rose by $1.5 million, but the lottery credit dropped by 6.9% from $343.6 million to $319.9 million.

Sales Taxes

County governments can opt to levy a 0.5% sales tax that is collected on top of the state’s 5% rate; 68 of 72 have done so. Much like the state, counties saw healthy growth in their sales tax collections, which rose by 8.2% from $553.2 million in calendar year 2021 to $598.5 million in 2022. (Several of the small local taxes in this report have been historically gathered by our organization on a calendar-year basis rather than a fiscal-year basis and we continue to use that approach since we cannot in all cases replace these data from decades ago.)

Next year, local sales tax collections should rise significantly, as both Milwaukee County (0.4%) and the city of Milwaukee (2.0%) approved new sales taxes after receiving authorization under 2023 Wisconsin Act 12.  The county expects to receive $84 million from its new 0.4% sales tax – which will be paid on top of the existing 0.5% sales tax – while the city is budgeted to collect $184 million from its 2% tax. These new taxes went into effect on January 1.

Wheel Taxes

County and municipal governments can choose to levy a vehicle registration fee, or “wheel” tax, and have increasingly been doing so over the past decade. Fees typically range from $10 to $40 per year.

In 2010, only four cities (including Milwaukee) and St. Croix County levied a wheel tax. In 2023, 15 counties and 36 municipalities did so, as wheel tax collections increased by 1.7% to $65.7 million. A large increase in state aid to local governments as well as additional state funding for local transportation projects may slow the growth in communities adding the tax in the near term.

Room, Premier Resort, and Local Expo Taxes

In general, municipalities in Wisconsin can levy up to an 8% tax on hotel stays so long as 70% of revenues are directed towards promoting tourism. After plummeting in 2020, room tax collections recovered significantly the following year, and have continued to do so, rising by 6.3%, from $113.8 million in calendar 2021 to $120.9 million in 2022.

Room tax collections in 2022 fell short of surpassing the latest pre-pandemic year, however. In 2019, room taxes increased for the 10th consecutive year and raised $121.5 million for municipalities.

In other tourism-related taxes, the Wisconsin Center District in Milwaukee levies directly or receives taxes on lodging, car rentals, and food and beverage sales. Those rose by a notable 19.1%, from $36.5 million in fiscal year 2022 to $43.5 million in 2023. With the Republican National Convention set to take place at the Wisconsin Center in 2024, this number should grow substantially next year.

On top of these taxes, eight municipalities around the state designated as “premier resort areas” can impose sales taxes on certain tourism-related businesses. Collections from these taxes rose by 13.1% in 2023 to $13.7 million.

Federal Taxes

Taxes paid to the federal government by Wisconsin residents are projected to decline by 1.8% in 2023, dropping to $69.16 billion from $70.40 billion in the previous year. As we do each year, we estimated figures for 2023 since the federal data for Wisconsin has not yet been finalized. After these taxes rose by more than $20 billion from 2020 to 2022, the projected decline in 2023 likely to some extent reflects the impact the slowing economy, inflation, and rising interest rates are having on overall tax collections.

State residents pay far more in federal taxes each year than in state and local taxes combined, and while the federal tax burden has risen slightly in recent years, it remains well below levels from the 1990s and early 2000s (see Figure 7). With the expected drop in federal taxes, Wisconsinites will see the combined federal, state, and local tax burden decline from 29.8% in 2022 to 29.1% in 2023.


While inflation remained at a relatively high level during the 2023 fiscal year, the increases to state and local taxes in Wisconsin for the year were more modest. Combined, all state and local taxes rose by 2.5% last year, an increase that is in line with those over the last decade. Personal income rose 2.0% both in Wisconsin and nationally, marking a slowdown from recent years but a positive development in that Wisconsin typically trails the nation in personal income growth. The state and local tax burden in the state rose almost imperceptibly.

Prices – including the cost of labor for local governments – did rise, however. Over the course of this year, the Forum has noted the workforce challenges facing state and local governments and school districts. When revenue does not grow to meet salary demands, these governments may face difficult choices that include losing experienced employees or cutting staff or services.

Some good news for local governments and potentially property taxpayers is on the horizon in fiscal year 2024. For local governments, the state budget and accompanying legislation known as Act 12 will provide an influx of state aid and tie future increases in that aid to growth in the state sales tax. Milwaukee’s city and county government will start receiving revenues from their new local sales taxes, which in the case of the county will mean a cut in property taxes. For school districts, a $325 per pupil revenue limit increase could help to pay for at least part of teacher pay increases that have lagged inflation over the last decade while increases in both state aid and the school levy credit will help to moderate the net property tax increase for homeowners.

The state government, meanwhile, still has billions of dollars in reserves after passing the 2023-25 budget. Legislators have disagreed thus far on how to use those funds, with Republicans hoping for further large income tax cuts and Democrats looking to spend much of the money on priorities such as child care and higher education. With only a few months left in this current legislative session, a resolution to this impasse may not come until after the 2024 elections.

Over the past several decades, Wisconsin has substantially reduced the amount of taxes it collects compared to the income of state residents. Along the way, it has lowered its national tax ranking but also its ranking in service metrics such as K-12 spending per pupil.

To some degree, the goals of reducing the tax burden and maintaining or increasing public services are in conflict with one another, both for policymakers as well as voters. That tension may make it more difficult to lower the tax burden in future years without some combination of service reductions, increases in efficiency through service sharing or consolidation, or greater economic growth that will produce higher incomes for Wisconsinites. Without that final element in particular, policymakers may find it difficult to keep future tax bills as affordable as they are today.