The Alliance for a Better Minnesota, a liberal organization aiming to put more Democrats in the state Legislature this year, is keying in on a common local election theme: property taxes.
As part of its effort to paint state Republicans as out of touch with average Minnesotans, ABM has been broadcasting this factoid during its Homestead Heist tour, in their literature, and in a recent television ad.
“[Republicans] passed a law making 95 percent of Minnesota homeowners pay higher property taxes,” the ABM ad states.
ABM doesn’t have enough information to make such a claim.
ABM is referring to the Legislature’s elimination of the Market Value Homestead Credit in 2011 as part of the budget deal that ended the government shutdown. Previously, local officials would use a formula to reduce taxes on homesteads, and the state would reimburse the locality for the revenue that was lost in the process.
In recent years, the reimbursement became unreliable because the Legislature regularly cut it.
So last year, the Legislature replaced the program with something called the Homestead Market Value Exclusion, a new approach that lowers the value of a home before tallying the taxes. The exclusion applies to homes valued at less than $413,800.
ABM says the elimination of the old credit made “95 percent of Minnesota homeowners pay higher property taxes.” PoliGraph ran that statement by three of the state’s leading authorities on property taxes – Steve Hinze with the Minnesota House Research Office, Jeff Van Wychen with Gov. Mark Dayton’s office, and Eric Willette at the Minnesota Department of Revenue – and all three agreed in their assessment: ABM’s claim only tells part of the story.
It’s true that the old credit applied to 95 percent of Minnesota homeowners. But that doesn’t take into account the effects of the new exclusion, which was meant to keep property taxes low for many of those same people.
Unfortunately, none of those tax authorities have looked at precisely what percentage of Minnesota homeowners are paying more in property taxes as a result of the credit’s elimination, so it’s impossible to peg a number to the situation. Hinze, Van Wychen and Willette agreed that it’s probably not 95 percent, however.
That said, there are few things we know for certain about how the credit elimination affected property owners.
Because the state is no longer reimbursing localities for offering the credit and because the tax base is effectively lower due to the new exclusion, cities and towns need to make up for the lost revenue one way or another. In some cases, the new plan has “shifted” the tax burden to business and apartment properties.
But how the new program’s effects have played out varies from place to place, said Hinze, who ran numerous simulations in 2011 to see how the new homestead exclusion could affect homeowners assuming cities and towns didn’t change the amount of property tax revenue they needed.
For instance, in Aitkin County’s Hill City, most residential homesteads saw their property taxes decline while commercial properties saw their taxes go up. Across the state in Freeborn County’s Glenville City, residential homesteads saw their property taxes go up, as did owners of other types of property.
Indeed, property taxes overall have increased by $365 million since 2011, or about 4.5 percent. Residential homesteads saw a 1.8 percent increase in the last year while agricultural properties saw a 10.4 percent increase.
But it’s important to note that those figures take into account all sorts of property taxes, some not under the Legislature’s control, and the numbers aren’t specific to the elimination of the homestead credit. The figures also include fluctuations in property values, also not a product of Legislative action.
Since 2011, the Department of Revenue estimates that nearly 69 percent of households saw an increase in their combined property taxes.
Two of PoliGraph’s criteria could apply to this claim: inconclusive ratings are given to statements that lack enough data to be definitive, while misleading ratings are given to statements that leave out important context or are exaggerated.
It was a tough call, but ultimately we landed on misleading. Here’s why:
The Alliance for a Better Minnesota tries to tie rising property taxes to a specific action taken by the Republican-controlled Legislature. Three leading experts say there’s no data to support their claim, and that it is unlikely to be 95 percent.
Further, ABM leaves out the important point that property taxes are on the rise for reasons unrelated to Legislative action, not just the elimination of the homestead credit.
The Alliance for a Better Minnesota, “Too Long,” Sept. 10, 2012
Minnesota House Research, The Homestead Market Value Exclusion, accessed Sept. 13, 2012
Minnesota House Research, House Simulation Research Report: Property Tax, Aug. 14, 2012
Minnesota Public Radio, Legislators work to restore tax break for frustrated homeowners, by Tim Pugmire, September 14, 2011
Minnesota Public Radio, Local governments look to make up shortfall after elimination of homestead credit, by Tim Pugmire, Sept. 27, 2011
Minnesota Public Radio, Video: Property Tax Increase, by Molly Bloom and Curtis Gilbert, Oct. 25, 2011
Minnesota Public Radio, Cities worry about taxpayer wrath, by Jennifer Vogel, Sept. 15, 2011
Minnesota Public Radio, Property taxes are rising for most, early estimates show, by Dave Peters, Nov. 10, 2011
Minnesota House Research, House Research Simulation Report: Property Tax, Sept. 20, 2011
Interview, Steve Hinze, House Research Analyst, Sept. 10 & 12, 2012
Interview, Jeff Van Wychen, Gov. Mark Dayton’s office, Sept. 11, 2012
Interview, Eric Willette, Minnesota Department of Revenue, Sept. 10, 2012