The other side of the “Dark Store” loophole debate you never hear about

A whopping 91% of voters in West Allis approved an advisory referendum Tuesday asking the state Legislature to close the so-called dark store loophole where big-box stores are seeing  big reductions in their property tax assessments.

Heck, I would have voted YES, too, if all I considered were the talking points right out of the lefty handbook.

Big corporations.

They are bad.

They are evil.

They do not pay their fair share.

Because big, bad corporations don’t pay their fair share, who suffers? That’s right. You, the little guy.

You have to pay higher taxes because big, bad, evil corporations don’t pay enough.

We’ve tried to fix this but the big, bad state of Wisconsin won’t listen to us.

It’s such an easy case to make.

But there’s another side of this story they refuse to talk about.

No one in Wisconsin has been following this issue more than Scott Manley of the Wisconsin Manufacturers and Commerce. I worked with him for many years when we both were employed by the Wisconsin State Senate. Manley is extremely sharp, and quite frankly, I trust him more than I do my own mayor and other local pols who have campaigned against the so-called “loophole.”

On  a whim I called my old colleague Manley back in March and asked him if he was pursuing any update on this story.

At that time Manley told me he just finished writing an op-ed piece he was going to pitch to local newspapers. Manley forwarded me his op-ed piece:

Dark Store Issue is Really About Higher Taxes

Everybody loves an underdog, and that’s especially true when a storyline pits the “little guy” versus a large corporation.

This is the narrative local governments have spun in the so-called “dark stores” debate.  They’ve positioned the issue as greedy corporations attempting to shift their tax burden to homeowners.  This makes for an interesting story, but it’s simply not true.

In reality, there are two indisputable facts that have been left out of the debate on this issue.  First, the property tax burden has actually shifted from homeowners to businesses over the last decade – the exact opposite of what your local politicians have likely told you.

Second, the dark store legislation is an effort to legalize tax hikes on businesses that assessors have been attempting to impose, illegally, for more than a decade.

This debate isn’t about “closing a loophole” or forcing someone to “pay their fair share.”  It’s about local governments wanting to tax to the max and villainize the businesses that provide jobs in their communities.

Let’s look at the data from the Wisconsin Department of Revenue. From 2008 to 2017, the share of residential property taxes statewide has actually decreased 2.4 percent. On the contrary, the share of property taxes paid by businesses has increased by more than 10 percent over the same time period.

In other words, if property tax collections were a pie, the slice from homeowners has gotten smaller, while the slice from businesses has increased.  Any politician who tells you businesses are shifting their burden to homeowners is simply wrong.

Why are businesses paying more?  It’s due in part because some assessors have unlawfully raised the property assessment of businesses by inappropriately adding the value of certain lease payments to the value of the land and building.  The Supreme Court declared this practice illegal in 2008, but that hasn’t stopped assessors from continuing their efforts to impose this illegal tax hike on businesses.

Some politicians have criticized businesses for challenging these unlawful assessments — as if it’s their patriotic duty to be overtaxed.

Keep in mind that cities, towns and villages have a self-interest in assessing property higher because it means they can collect more taxes.  That’s why it’s so important that our laws allow property owners to challenge their assessment with an unbiased third-party review to ensure fairness and adherence to the law.

When these disputes go to court, businesses consistently win because the higher assessment was not lawfully imposed.  The courts then force the local government to give back the amount of the tax that never should have been collected in the first place.

It’s frustrating that local officials complain about having to give back money they illegally took from property owners.  After being forced to return the money they had no authority to take in the first place, local governments then have the gall to complain that businesses aren’t paying their fair share.

Here’s some advice to local officials: if you don’t like paying back money that you took illegally, and if you don’t like paying legal fees when taxpayers take you to court to get their money back, just follow the law.

Instead of following the law, local officials are looking to change it.

They’re vigorously lobbying for a new law that will allow them to raise taxes in a manner the courts have consistently told them they cannot do.  They’re asking the legislature to give them taxing authority that no other state in the country has allowed.

This municipal “tax to the max” scheme is so bad, even big-taxing Governor Jim Doyle had the good sense to veto the idea in 2009.

There are many other concerns with these bills, including unconstitutionality, which I cannot mention in the limited space afforded by this column.  I will, however, give an example.

Through no fault of their own, and with no changes to their land or building, Badger Meter’s facility in Mount Pleasant would see a $68,000 per year increase in their property taxes if the dark store bills became law.

Raising taxes on homegrown companies like Badger Meter, who are actively bringing workers back to our state, is not the way to make Wisconsin prosperous.  It also happens to be incredibly unfair.

WMC negotiated a compromise prohibiting a vacant property that is dilapidated or distressed from being used as a comparable for assessment purposes.  Lobbyists for local governments could have taken that compromise and declared a legislative victory.  They rejected that compromise because that’s not what this issue is really about.

Instead, they’re holding out for the oppressive tax-hiking authority that no other state is willing to authorize.  Governor Doyle rejected this idea before, and the legislature should reject it again.
—-Scott Manley, WMC

Finally, two experts that deal with property tax appeals have written about this issue on a Bloomberg news site:

The “Dark Store Theory” was initially developed by a handful of activist assessors and appraisers in an attempt to tax big box retail stores based on above-market built-to-suit leases as opposed to their fee simple fair market values in order to increase local tax bases. These activist assessors and appraisers have creatively spun the theory as a “tax loophole” used by large corporations seeking to avoid paying their “fair share” of local property taxes. Proponents of the theory argue that big box retailers want their operating stores valued as if they were empty and abandoned – i.e. like a “dark” store.

Our opinion? The theory is nothing more than a populist propaganda tool being used to blame those perceived as outsiders for shortfalls in local governmental budgets.

5 thoughts on “The other side of the “Dark Store” loophole debate you never hear about

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