Cities and towns across the state are weighing whether to increase their property tax levies. Complicating the question is a new program included in the latest budget meant to reduce the property tax burden for some homeowners.
House Minority Leader Rep. Paul Thissen says the state’s new approach to property taxes won’t provide relief.
“The bottom line: Republicans eliminated a program that provides $538 million each biennium in property tax relief and replaced it with a program that provides $0 in property tax relief,” Thissen wrote in a recent e-mail to constituents.
Thissen’s claim is correct.
Previously, people who owned property valued at less than $413,800 got a tax break. The credit got bigger as property value declined. The state reimbursed communities for the property tax loss.
But in recent years, the state wasn’t always coming through with the money, so the Legislature and Gov. Mark Dayton eliminated the credit program in the latest budget to save some cash. It was replaced with an alternative that is still meant to target those owning property valued at less than $413,800, but now the state won’t be reimbursing taxing jurisdictions for the money they miss out on as the result.
So, the state is providing “$0 in property tax relief” to local governments. According to the Minnesota Department of Revenue, eliminating the credit will save $538 million in the next biennium – the equivalent that would have been “provided” to communities as Thissen said.
Many property owners will see higher taxes because Minnesota taxing jurisdictions are weighing property tax increases to make up for lost state aid.
As an aside, it’s important to point out that, while Thissen and the other House Democrats voted against the tax portion of the final budget, he frames the elimination of the credit as a Republican effort. The GOP effectively endorsed the plan by voting for the bill, and Dayton did, too, by signing it.
Thissen claimed that the new property tax plan provides “$0 in property tax relief” and he’s correct: The state will no longer reimburse localities for the lost aid. And while some properties will be taxed less under the new plan, most will be taxed more.
MPR’s Ground Level blog, St. Paul property taxes go down (for a few) and up (for many), by Dave Peters, Oct. 6, 2011
Minnesota Public Radio News, Tax hike saddles business, property owners, by Tom Robertson, October 13, 2011
Minnesota House Legislative Research, Homestead Market Value Credit, accessed Oct. 11, 2011
Minnesota House Legislative Research, The Homestead Market Value Exclusion, accessed Oct. 11, 2011
Minnesota Department of Revenue, Understanding Recent Changes in Homestead Benefits
Minnesota House Legislative Research, Alternative: Pay 2011 under MVHC conversion with no levy change, Sept. 9, 2011
Minnesota House Legislative Research, Alternative: Pay 2011 under MVHC conversion with no levy change, Sept. 20, 2011