The difference between a tax and a user fee may seem obvious at first glance: a tax is generally applicable and funds general activities, like an income or sales tax, while a user fee is targeted to the activity at issue, like paying to visit a national park site. But the Wisconsin Supreme Court had to clarify that line recently, as a revenue-hungry municipality created a new way to levy “user fees” to avoid statutory tax limits.

The Town of Buchanan is a rural municipality near Green Bay, Wisconsin. The town board imposed a Transportation Utility Fee following a referendum in which the voters chose the new fee over other methods of raising additional revenue. The town created a new transportation utility district (coterminous with the town borders) and then assessed the fee to developed properties based on a formula for road usage. All residential properties were assessed a flat fee ($300), while commercial properties were charged based on the size and type of business and the estimated number of cars that would use municipal roads to visit the business.[1] The funds generated slightly less than a $1 million annually, which was dedicated to road maintenance. This represented a huge boost to the Town’s overall revenues, as property taxes only generated about $2.4 million annually.

Decades ago, the Wisconsin Legislature enacted a levy limit statute that allowed municipalities to increase their property taxes to reflect new construction, but to go no further than the levy limit allows without voter approval in a referendum. Revenue-strapped municipalities like Buchanan, anxious to meet rising health care costs and salary expectations for their employees, have looked to impose user fees as a work-around solution. The transportation utility fee is one such effort, but some Buchanan residents challenged the new charge in court.

In a unanimous opinion written by Justice Rebecca Bradley, the Wisconsin Supreme Court concluded that a tax by any other name is still, in fact, a tax. She invoked Chief Justice John Marshall’s famous dictum from McCulloch v. Maryland, “the power to tax involves the power to destroy,” before strictly construing the statute’s text.[2] She noted orthogonal problems with the transportation utility fee—it taxes property based on road usage rather than value; it does not exempt churches and other non-profit property owners—before turning to the core question: is the utility fee in fact a property tax subject to the statutory property tax caps?

In an opinion that quotes Justice Antonin Scalia several times, Bradley provided the answer: if it walks like a duck, quacks like a duck, and looks like a duck, it is, in fact, a duck. The “taxation of property” and a “property tax” are one and the same, and the Town of Buchanan cannot try to pretend otherwise.[3] She also scolded the Town for trying to hide behind the legal fiction of a utility district. Though state law authorizes utility districts, their purpose is to allow heightened taxation for heightened services in a particular subsection of the municipality, not to provide for ongoing maintenance in a district that covers the entire municipality.[4]

This conclusion drew the support of all seven justices on a court known nationally for its deep jurisprudential divisions. Justice Rebecca Bradley also filed a concurrence alongside her majority opinion to address a state constitutional question raised by the parties but unnecessary to resolution of the case because of the statutory holding. She prefaced her discussion by justifying her desire to reach the further issue: “A rigid constitutional avoidance doctrine would effectively override the people’s sovereign will and leave their liberties subject to arbitrary and capricious government action.”[5] Thus, she argued that the state would be best served by clarity as to the constitutional provision.

That provision, the uniformity clause, “serves to protect the citizen against unequal, and consequently unjust taxation.”[6] The easiest way to apply this clause to property taxation is to assess and tax all property based on its fair market value. The transportation utility fee failed that test, in Justice Bradley’s view: it was charged as a flat fee to all residential properties, regardless of their fair market value. It also treated businesses differently: a drive-through restaurant and a sit-down restaurant may have similarly valued buildings atop similarly sized lots, but the drive-through was charged more for the number of visitors who use town streets to reach it. She rejected the notion that the utility fee can be exempted as a special assessment since it was used for ongoing maintenance rather than a one-time capital project that benefited one particular set of properties.

As a result of Justice Bradley’s opinion, municipalities will be further constrained to stay within current levy limits, and any relief will have to start in the Legislature.

[1] Wisconsin Property Taxpayers, Inc. v. Town of Buchanan, 2023 WI 58, ¶ 4.

[2] Id. at ¶ 11.

[3] Id. at ¶ 14.

[4] Id. at ¶ 27.

[5] Id. at ¶ 34 (R.G. Bradley, J., concurring).

[6] Id. at ¶ 37 (quoting Gottlieb v. City of Milwaukee, 33 Wis. 2d 408, 426, 147 N.W.2d 633 (1967)).

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