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Making sense of tax bill can be a challenge

I hate to end the year writing about tax bills, but I have received more calls on the subject this year than I have in a long time. For every call I get, I’m sure there are many other taxpayers with the same questions on their mind. Not every call ends on a high note, but I do find that there is a fair amount of confusion on the topic.

Some taxpayers get sticker shock when they open their bill and reach for the phone before taking a close look at it. When you pay your tax bill, you are actually funding a number of different units of government, not just Walworth County. Typical taxing jurisdictions that appear on your bill include the state of Wisconsin, Walworth County, the town or municipality in which you live, your local school district or districts and Gateway Technical College. Each one of these jurisdictions is authorized by state law to impose property taxes and is governed by an independent board or council. Each jurisdiction establishes its annual budget through a series of public meetings and hearings.

Because the taxes in the bill that you just received were levied to support 2013 budgets, the time to state your views on taxes was at those meetings. One taxpayer pointed out, however, that he works several jobs just to pay his taxes and doesn’t have time to keep track of five or more local budgets. He has a point. Wisconsin has more than its share of taxing jurisdictions, which makes it difficult for people to understand exactly who is making spending decisions.

Walworth County has frozen its tax levy for the last two years. Despite this fact, taxpayers call me and report that their county taxes have gone up by $100 or more since last year. The tax bill itself doesn’t help. It contains a column labeled “% Tax Change.” It is understandable, but incorrect, for taxpayers to look at this column and conclude that a particular jurisdiction increased spending by this percentage. In reality, the “% Tax Change” column represents the percentage by which your share of the county tax levy increased or decreased over the past year. Because the county has not increased its overall tax burden, if your share of taxes went up, someone else’s went down. Property assessments and equalized value are keys to solving this mystery. The increase or decrease in the value of your property, relative to other property owners, determines, in the case of this year’s county tax bill, at least, whether you will owe more or less than last year.

Consider the hypothetical county of Badger. To make things simple we will give it an annual budget of $1,000 and two property owners. In 2011 the homes of both of our residents are valued at $100,000 each. Our tax rate to fund county operations is, therefore, five dollars per $1,000 of assessed value. In December, each taxpayer receives a bill for $500. In 2012, equalized value decreases in Badger County. The home values of both taxpayers decline, but not equally. Taxpayer A’s home is now assessed at $90,000 while Taxpayer B’s home falls to $60,000. We will assume that the county froze its tax levy at $1,000. Because the overall assessed value decreased to $150,000, our tax rate increased to $6.66 per $1,000 of valuation. This year Taxpayer A gets a bill of $600 while Taxpayer B’s bill is $400.

My Badger County hypothetical is not much different than what has happened in Walworth County in recent years. Following years of double-digit increases, property values, as measured by the Wisconsin Department of Revenue, have declined. The county’s overall equalized value, the price that would be fetched if all taxable property was sold, decreased by 11 percent, or $1.6 billion, since 2009. That decrease, however, has not been distributed equally across the county. If your property has maintained its value in recent years, you are likely shouldering a larger proportion of the tax burden.

In Wisconsin, assessments are prepared at the local level. Each town, village and city hires an assessor or contracts with a real estate appraisal company to determine the value of each home or parcel of land. In the case of certain businesses, the amount of taxable personal property also is determined. When the local process is concluded, the DOR takes its turn by “equalizing” all of the valuations from the various jurisdictions. This ensures that there is an “apples-to-apples” comparison of property values across the state. One way to tell if you are paying your fair share of taxes is to look at the “Estimated Fair Market Value” of your property on the tax bill. If you disagree with your assessor’s opinion, state law provides several different avenues of appeal. Appeals to the equalization process can be made by any municipality or county.

The DOR summed up the situation better than I can in its publication on equalized value: “Property tax is a topic that we can all relate to but few of us can explain in any detail.” While it may be a confusing topic, it is worth learning more about. The best resource that I have seen on the topic is the “Guide for Property Owners.” It can be downloaded on the DOR’s website at www.revenue.wi.us.