New Milwaukee sales tax brings in $200M for city

A new sales tax in Milwaukee brought in just over $200 million for the city in 2024, the first full year it was in effect. 

Local officials were given authority to raise the tax rate through Act 12, the bipartisan shared revenue deal the state Legislature approved in 2023. 

The sales tax in the city of Milwaukee is now 7.9 percent, which includes the city’s 2 percent tax, the state tax of 5 percent and 0.9 percent from the county. Milwaukee County’s sales tax climbed by less than 1 percent to a total of 5.9 percent.

Both increases went into effect on Jan. 1, 2024.

The total figure the city received from the 2024 sales tax was $200,621,090, according to City Comptroller Bill Christianson. That’s above the city’s original projection of $184 million. 

“Had we not gotten a local option sales tax and had we not gotten increases in our shared revenue, both of which were part of Act 12, the city was about to go off a very steep fiscal cliff,” city budget director Nik Kovac said.

There are stipulations on how the city can spend the money it receives from the new tax. Wisconsin’s shared revenue law requires the city to spend the revenue from the increased rate on public safety and city pension liabilities.

“It is exciting to have been able to raise that much with our sales tax,” Milwaukee Mayor Cavalier Johnson said. “We can’t necessarily play with the money though because there are strict things, strict ways we have to spend that money.”

Kovac said 10 percent of the city’s 2024 sales tax collection has to be spent on, “maintaining current levels of public safety, which means police and fire expenses.”

That comes as Act 12 says the city must maintain staffing levels for the Milwaukee Police Department and Milwaukee Fire Department year over year.

Kovac said the remaining 90 percent of the sales tax money has to be spent on pension costs, including the city’s unfunded pension liability.

A Wisconsin Policy Forum city budget brief found the city’s pension fund obligations created “a potentially devastating budget challenge for the city.”

Pension obligations have grown over time, with the city having to devote a growing percentage of its revenues to coverage of the benefit. According to the policy forum, that cost had jumped to $100 million in 2023 and $206.7 million in the 2024 budget. Act 12 not only requires new revenue to go toward covering those obligations, it also requires new employees to be part of the Wisconsin Retirement System.

“This is something that the city would have had to pay for anyways,” Ari Brown, a researcher with Wisconsin Policy Forum, told WPR. “This is not something that would have just gone away.”

City still faces future budget issues 

Without the sales tax money and without an increase in shared revenue from the state, officials in the city of Milwaukee would have been forced to close several fire stations and libraries and eliminate jobs for hundreds of firefighters, police officers and library employees.

Johnson said he wished the state would have allowed the city more leeway when it comes to how it can spend the sales tax revenue.

“Having more flexibility gives you more flexibility, and that’s something that we would, of course, like to see,” Johnson said.  

But even with the sales tax, Milwaukee will still likely be facing a “persistence of significant budget gaps in the coming years,” according to a 2024 city budget document.

Milwaukee’s sales tax is still not as high as other larger cities across the Midwest, including in Chicago, which has a 10.25 percent sales tax, or Minneapolis, where the sales tax is at 9.03 percent.

Milwaukee County also gets boost from sales tax increase  

Milwaukee County officials were also allowed to raise the county sales tax under Act 12. The county sales tax climbed from 5.5 percent to 5.9 percent last year.

Data from the Wisconsin Department of Revenue found Milwaukee County has received $167 million from its sales tax in 2024. That’s up from $101 million in 2023 and $96 million in 2022. 

A January analysis from the Wisconsin Legislative Fiscal Bureau said the county must spend the extra money on its unfunded pension liability.