Taxes / Business Costs

Milwaukee scores high marks for favorable tax structures for business. A national and international ranking of cities in 2008 by KPMG International found that among 24 mid-sized U.S. cities — defined as having populations of a half million to 2 million — Milwaukee ranked No. 4, 4% below the national average for total taxes paid by corporations.

According to a study by Ernst & Young, Wisconsin ranks 30th in state and local business taxes as a percentage of gross state product for fiscal year 2008. As a percentage of personal income, Wisconsin’s state and local tax burden (11.8%) is only slightly higher than the 11.3% national average. 

In 2011, Wisconsin ranked fourth-lowest in the nation for state and local tax burden on business expansion, according to an Ernst & Young study. The study ranked states according to the local tax burdens on new investments by businesses.

The Milwaukee Region has some of the lowest unemployment and workers compensation costs in the country and offers a variety of tax advantages for businesses, including:

  • Property tax exemptions for manufacturing machinery, equipment, inventories, pollution control and computers
  • A 60% capital gains exclusion
  • Tax credits for research and development and for energy used in manufacturing processes

Corporate Income Tax
Individual Income Tax
Sales Taxes
Property Tax
Unemployment Compensation
Worker's Compensation

 
CORPORATE INCOME TAX

Businesses are subject to a 7.9% tax on income but receive tax credits for research and development and for sales taxes paid on fuel and electricity used in manufacturing operations. Income for multi-state companies is apportioned on a single sales factor basis, greatly simplifying tax-return preparation.

Individual Income Tax

Wisconsin’s progressive income tax ranges from 4.6% to 6.75% of adjusted gross income as follows:

Taxable income - married persons filing jointly
$0 to $11,480             4.60%
$11,481 to $22,960     6.15%
$22,961 to $172,200   6.50%
More than $172,200    6.75%

Taxable income - filing as single
$0 to $8,610              4.60%
$8,611 to $17,220      6.15%
$17,221 to $129,150  6.50%
More than $129,150   6.75%

Exclusions to income include:

  • 60% exclusion on long-term capital gains
  • 100% on the sale of stock in eligible small businesses if held for five years or more
  • 100% on intergenerational transfers of farming and business assets

 
SALES TAXES

Sales taxes vary among counties. The statewide tax rate is 5 percent. Some counties assess an additional 0.5 - 0.6 percent tax.

Sales tax by county

  • Kenosha - 5.5%
  • Milwaukee - 5.6%
  • Ozaukee - 5.6%
  • Racine - 5.1%
  • Walworth - 5.5%
  • Washington - 5.6%
  • Waukesha - 5.1%

The use tax, which is the same as the sales tax, is assessed on the use, consumption or storage of property that was purchased without paying sales taxes.

Exemptions from the sales and use tax include:

  • Manufacturing machinery and equipment
  • Manufacturers' raw materials
  • Pollution abatement, waste treatment and recycling equipment
  • Fuel and electricity used in manufacturing

 
PROPERTY TAX

All property located in the state, except personal furnishings, clothing and property for which there is a specific exemption, is subject to taxation. Manufacturing, telecommunication and utility properties are assessed by the Department of Revenue while all other property is assessed by the municipal assessor. Exemptions from property tax include:

  • Machinery and equipment used in manufacturing
  • Merchants' and manufacturers' inventories
  • Computer equipment
  • Pollution abatement equipment

Property taxes in the Milwaukee Region vary from $15 to $30 per $1,000 of value. Significant exemptions from property taxes include:

  • Non-business personal property
  • Manufacturing machinery and equipment
  • Computers and related equipment

 
UNEMPLOYMENT COMPENSATION

Wisconsin pioneered unemployment insurance in the United States more than 70 years ago and takes pride in its ability to serve both Wisconsin workers and Wisconsin businesses. Employers paid the lowest possible unemployment compensation (U.C.) taxes in 2004 for the 13th straight year. The average Wisconsin employer in 2003 paid 2.2% of taxable wages in U.C. taxes, below the U.S. average. Unemployment taxes are experience-related. Employers pay unemployment taxes on the first $12,000 of each employee’s wages.

Taxable Payroll <$500,000
Minimum rate - 0.05%
New employers - 3.25%
Construction - 6.60%

Taxable Payroll>= $500,000
Minimum rate - 0.10%
New employers - 3.40%
Construction - 6.60%

Maximum rate (all employers)
9.80%


Wisconsin Benefit Levels Compared with Other States

Wisconsin unemployment insurance benefits replace about 37.7 % of the average weekly wage, which ranks 28th out of 50 states. Only six states have a lower exhaustion rate than Wisconsin; only eight states have an average duration shorter than Wisconsin.

When there is a dispute between a claimant and an employer, the dispute is first decided by an adjudicator. Wisconsin adjudicators make about 220,000 decisions each year. In 2006, 55% of decisions denied benefits, while 45% allowed benefits. More than 85% of adjudication decisions are made within 21 days of filing. The federal standard is 80%.


Unemployment Insurance - Comparisons with Neighboring States and U.S.
STATE
AVE. DURATION
EXHAUSTION RATE*
AVE. BENEFITS PER RECIPIENT
AVE. WEEKLY BENEFIT 
Wisconsin 13.1 weeks
24.9%
 $3,150  $265.46
Illinois 17.3 weeks
35.6%  $5,200  $303.98
Indiana  13.1 weeks  39.8%   $3,698  $288.50
Iowa 12.7 weeks
24.6%  $3,501  $288.54
Michigan 14.8 weeks
34.0%  $4,242  $292.33
Kentucky  13.1 weeks  21.1%   $3,552  $279.79
Minnesota 15.7 weeks
31.7%  $5,066  $337.84
U.S. Average
15.1 weeks
35.4%  $4,139  $287.50

* Exhaustion rate = % of recipients who collect 26 weeks of benefits
Data from U.S. Department of Labor, June 30, 2007

Worker's Compensation

Wisconsin's Worker's Compensation premium rates are among the lowest in the country. Set by the Wisconsin Compensation Rating Bureau and paid to private insurers, the rates declined 33% during the 1990s and 4.5% in 2005 alone.

Risk and Insurance a national trade magazine, has called Wisconsin "a worker's comp utopia."  The national Worker's Compensation Research Institute has concluded that Wisconsin has "the lowest rate of requests for litigation of any state we have studied" because "management and labor control the system through a labor and management advisory council." Wisconsin's Worker's Compensation rates typically provide significant savings over those of neighboring states as illustrated by a Five State Comparison.

Business Expansion

Wisconsin ranks

4th lowest

in the nation for state and local tax burden on business expansion.