County Sales Taxes Surprise

Counties faced many challenges in 2020, most related to the COVID-19 pandemic. Nevertheless, most counties received a bit of good news in December when their final sales tax payment from the state arrived. In a year of economic upheaval, 62 counties saw their 2020 sales tax revenues increase from 2019.

In 2020, 68 of Wisconsin’s 72 counties imposed the optional 0.5% sales tax. For Menominee and Outagamie counties, it was their first year with the tax. On average, the sales tax accounts for about 9% of total revenues for counties that impose it.

With the onset of the pandemic, there was significant concern about county sales tax revenues. Questions were more often about “how much they would decline” rather than “would they decline?”

By summer, it started to become clear that (1) the overall decline in sales taxes was probably going to much less than anticipated, and (2) many counties were likely to see collections rise from 2019 levels.

Part of this was due to the federal stimulus that injected nearly $20 billion into the state’s economy in April through July. Rather than falling precipitously like GDP, Wisconsin’s total personal income rose 8% in the second quarter of 2020.

The geography of purchases also shifted during the pandemic. Many Wisconsinites commute across county lines for work, and while in their “work county” make purchases. With a large share of residents working from home, many of these purchases were shifted from the work county to the county where the employee lived. As a result, counties with large retail sectors that typically draw from neighboring rural counties suffered, while rural counties benefited from purchases made in their counties.

Significant increases in online purchases had a similar impact. Rather than traveling to retail outlets in these larger urban areas, many residents made purchases online, shifting the sales tax from the urban county to the rural one. From March through November, online sales increased 72% from the same period in 2019.

The map above shows the change in sales tax collections from 2019 to 2020 by county. The largest decline was in Sauk County (-6.0%). Wisconsin’s two most populous counties, Milwaukee (-2.3%) and Dane (-4.3%) also experienced significant drops. Collections in Monroe county were down, but by less than 1%.

In 13 counties, collections rose more than 10%, with Burnett (+15.3%), Pepin (+12.9%), St. Croix (+12.8%), Polk (+12.7%), and Marquette (+12.5%) counties leading the way.

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