WISCONSIN STUDYING AD, SERVICE TAXES

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Wisconsin lawmakers are wrestling with an idea to subsidize the state's education system with proceeds of an expanded sales tax on advertising and other business services.

The Democrat-controlled General Assembly, by an 81-15 vote, approved a bill to end subsidizing the state school system with property tax revenue. But such a move would require the state to come up with nearly $3 billion in replacement funding, and advertising is among the candidates to bridge the gap.

The Department of Revenue and its Legislative Fiscal Bureau have projected that extending the state's 5% sales tax to advertising would raise $73.5 million, said Mark Bugher, Wisconsin secretary of revenue.

Advertising is now exempt from the sales tax, as are more than 100 other business. If all were taxed at 5%, the state would realize about $2.8 billion in new revenue, Mr. Bugher said.

But there are still a few obstacles to a Wisconsin ad tax.

The Republican-controlled Senate this week is likely to vote on the measure passed by the assembly, and Mr. Bugher said he expects the Senate to defeat the legislation.

"What's more likely is that we will use some existing money to fund increased school appropriations," he said.

Mr. Bugher said he believes the two legislative chambers will eventually agree on an interim funding bill and then establish a state commission to study new sources of revenue.

"The governor is not opposed to a commission looking for reasonable funding mechanisms so we can get off the property tax, but he opposes increasing the sales, corporate or income taxes," Mr. Bugher said.

But Gov. Tommy Thompson, a popular three-term Republican in a predominantly Democratic state, might not be so opposed to expanding the sales tax to business services, Mr. Bugher said.

The assembly is trying to find a substitute funding source to replace the property tax, said a spokesman for Gov. Thompson, Deputy Communications Director Mike Brie. But Mr. Brie dismissed the prospect of an ad tax. "The Senate is simply not going to pass this," he said.

Ad industry officials dismissed the development as unlikely to be approved but said the climate for targeting advertising and other services likely will take a turn for the worse after the fall elections.

"Nothing much is going to happen this year," said Linda Dove, VP-state government affairs at the American Association of Advertising Agencies. "But next year could be very different."

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