Minnesota’s property tax change comes into focus — kind of

Exactly what Minnesota lawmakers and the governor wrought this summer when they eliminated the market value homestead credit for property taxpayers is slowly coming into focus. You can now get a picture of what would have happened to property taxes in your community this year had this change been made a year ago.

The latest visual aid is a 900-plus page pdf file cranked out by House of Representatives tax analyst Steve Hinze that shows how widely varied the impact would have been around Minnesota had the credit been replaced a year ago with the state’s new “exclusion.”

Bottom line: Communities with lots of commercial and industrial property and high value homes would have escaped major shifts. But some homeowners in cities with lower value homes and little non-residential property (think outstate Minnesota) would have seen tax bills greater by 10 percent or more.

(Definition of terms for those just catching up to this dust-up: The old credit was applied on a sliding scale after your property tax was figured. The state eliminated it so it won’t have to pay local governments the difference anymore. The new exclusion will, on a similar sliding scale, reduce for tax purposes the value of your home before the tax is figured. Let’s just say not every consequence of this switcheroo was foreseen, and the change is headache-inducing for local officials.)

Using Hinze’s model, you can look up every city in the state and see what would have happened to the 2011 tax on a low-value, average-value or high-value home and on commercial or industrial properties under the new program.

And if you did that, what would you conclude? Statewide, property taxes would have been $272 million greater. That’s a 3.4 percent increase. The percentage hike would have been greatest outstate and it would have been slightly greater for residential property than for commerical-industrial property, the two largest classes of property.

Beyond that, you would see that the impact is all over the map.

In Ely, the average home would have barely noticed the difference. In Winona, the average home’s tax would have been 6.9 percent higher; in New Ulm 5.1 percent higher; in Aitkin 11.8 percent higher. In Minneapolis, average homes would have been hit 1.6 percent harder. In St. Paul, average homes would have seen taxes 3.2 percent higher.

But even within a single city, the impact would have varied a lot as well. Take Caledonia in southeastern Minnesota. The average home value is $106,600 and its tax would have been only slightly higher with the market exclusion than it was with the credit — 1.9 percent. But a Caledonia home assessed at $71,000 would have seen its tax lowered by 4.9 percent. A $213,000 home’s tax would have been 8.2 percent higher.

Here are a couple more cities, just to show the varied impact of the change on differently valued property :

Austin

Home worth $69,600 —- up 7.9 percent

Average home, $104,300 —- up 9.5 percent

Home worth $208,700 —-up 11.0 percent

Commercial property worth $300,000 — up 8.7 percent

Minneapolis

Home worth $160,300 —- down 0.9 percent

Average home, $240,300 —- up 1.6 percent

Home worth $480,600 —- up 3.5 percent

Commercial property worth $300,000 —- up 1.9 percent

Go to Hinze’s data to find your city.

Hinze says the metro-outstate variation is due to the lower property values outstate and the fact that metro area property taxes lean more heavily on commercial and industrial property.

Keep in mind one huge caveat. This is a hypothetical exercise. It assumes that every city, school and county would have levied the same total tax on their residents and businesses with or without the new exclusion. Given their knowledge of their taxpayers’ moods, that’s an assumption that may or may not be valid. We’re running through the real-life test of this as cities, schools and counties set their budgets in the coming months.

Republican legislators in particular are urging them to tighten their belts much as the state did. Many local officials are essentially saying they already have.

But that aside, the great variation in Hinze’s data is still eye-opening. And it tells you why local officials are spending a lot of time figuring out how to present tax information this fall.

“Trying to explain it to individual taxpayers is going to be a problem,” Chris Samuel in Ramsey County’s property tax office told me Thursday.

Hear me discuss the property tax change with Tom Crann on All Things Considered:

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