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Wisconsin Report from the Statehouse: Correcting the Record on the Dark Stores Theory

Written by Cory Fish

“Dark Stores” became a popular populist rallying cry during the last legislative session. The prevailing narrative, that “big businesses” are shifting their tax burden onto homeowners, resulted in two of the most heavily debated bills of the legislative session. The only problem, the narrative is false.

The Wisconsin Department of Revenue’s own data shows that over the last ten years the statewide property tax burden has shifted from homeowners to businesses by approximately 3-percent. Businesses are paying a larger portion of the property tax than they were ten years ago.

The real story is that a decade ago, some tax assessors and local officials decided to adopt a novel, and illegal, property assessment theory to target businesses with tax increases. When businesses challenged these illegal tax increases in court and won, these very same tax assessors tried, and failed, to get the Legislature to pass two bills to legalize their illegal actions. Now local governments are spending millions of taxpayer dollars on campaign ads, PR firms, and lobbyists to cover up their actions by selling the bills as a fix to a “loophole.”

Assembly Bill 386/Senate Bill 292 (AB 386) would have allowed tax assessors to value occupied property higher solely because of its occupancy. For example, if you had two homes identical in every respect except that one was occupied and one was vacant, the occupied home would be valued (for tax purposes), and taxed, more than the vacant one. No rational buyer would pay more for the occupied home than the vacant one. The idea is absurd on its face. The fair market value of each property would be the same, but this legislation would increase the assessed value and thus the property taxes for the occupied home.

Assembly Bill 387/Senate Bill 291 (AB 387) would have allowed tax assessors to value and tax financial agreements, contracts, and other things of value that are “inextricably intertwined” with a property. This bill targets the value of financing agreements that help businesses open or grow. Tax assessors want to add the value of those agreements to the value of the building and land when determining the amount of property tax you owe. If this were applied to a residential home – which it could be because of the Wisconsin constitution’s uniformity clause – your local government could raise your property taxes because you took out a mortgage. However, property taxes would not be hiked on your neighbor who bought the same exact house but had the means to purchase it with cash.

These pieces of legislation would result in tax increases on businesses through no fault of their own. Increasing the tax assessment on a property based on occupancy as AB 386 would do or based on financing as AB 387 would do does not reflect economic reality. The business will not have expanded, improvements will not have been made to the property, and the neighborhood will not have become more attractive to the market. In short, the market value will not have changed – just the tax bill. Arbitrarily increasing property taxes is bad for Wisconsin.

WMC ranked these bills as two of the ten worst bills for business introduced this session. We believe these job killing tax increases are bad public policy.

First, these bills are a solution in search of a problem. As stated above, the statewide property tax burden has steadily shifted from residential property to commercial and manufacturing property over the last decade. This legislation would cause that disparity to become even wider.

Second, the Wisconsin Constitution’s Uniformity Clause will spread these tax increases to all property taxpayers. The state constitution requires all property to be taxed in a uniform manner. There is not an exception that allows small businesses, manufacturers, and residential properties to be taxed differently from “big box” retailers. All businesses and residential properties will be roped into abiding by these new property tax assessment laws, which will increase their property tax burdens.

Finally, the legislation creates uncertainty and will lead to more litigation. The legislation creates uncertainty because it changes bedrock rules of property assessment that Wisconsin has followed for decades. Local governments and property owners will both attempt to clarify the new law through more litigation.

Higher taxes and more litigation is not the kind of change Wisconsin needs. WMC is a strong supporter of the reforms taken place over the last seven years that make Wisconsin a more competitive place to work and live. Let’s not go backwards now and raise taxes on job creators and working families.

Cory Fish is the Director of Tax, Transportation, and Legal Affairs at Wisconsin Manufacturers & Commerce. He can be contacted at