Property taxes could drop by $121M next year

The Minnesota Department of Revenue is projecting a $121 million decline in property taxes next year.

Gov. Mark Dayton and Democratic lawmakers cheered the prediction, which would be the first drop in Minnesota property taxes in a decade.

The state steered millions of extra dollars to local government aid in the most recent budget, with the expectation that the money will be passed along to the taxpayer in the form of lower property tax levies. The state will have to wait until after December, when cities and counties set next year's property tax rates, to know for sure if that happens.

Revenue Commissioner Myron Frans said his office made its projection based on prior experience, watching what counties and cities have done in the past with this sort of aid. Without the addiitonal money, he said, his office projected that local property taxes would have increased by $180 million in 2014.

Property taxes, Dayton told reporters Tuesday, are "the most unfair tax."

"People have to pay property taxes whether or not they have a job or their income's gone up or down, whether or not their business or their farm's making a profit," he said.

How reliable are these estimates? Dayton joked that the department that makes the property tax estimates isn't the same one that predicted that electronic pulltab devices would bring in enough money to fund the state's share of the new Vikings stadium.

"The division of Revenue that makes these projections is different from the one that makes the charitable gaming," Dayton joked.

Republicans, however, were skeptical.

"I think his projections on what will happen with property taxes are about as reliable as the e-pulltab projections," said Senate Minority Leader David Hann, R-Eden Prairie. "They're coming from the same source."

Hann predicted that the extra government aid will simply lead to extra local spending, not lower property taxes.

"Based on history, when you give local governments additional resources, they spend it," Hann said.

Local governments do have the option of spending that extra money on road projects or extra police or other extras around town. But Dayton said he expects most to pass the savings along to property owners.

"I would expect that local government officials will be delighted to take the additional resources that the state provides and use that to reduce the property tax burden, because they hear about it just as much as we do here," he said.

The Minnestota Legislature's newly elected Democratic majority passed a $2.1 billion package of tax increases this session, raising taxes on smokers and the wealthiest 2 percent of Minnesotans with the hope of seeing property taxes go down as a result.

"We said what we were going to do last November and the voters responded," Dayton said. "The Legislature has kept those promises."

House Minority Leader Kurt Daudt, R-Crown, called Dayton's announcement a "stunt to try to sell to the public that ... $2.1 billion in taxes is somehow a good thing."

The property tax question will be settled in February, after local communities report their new property tax rates to the state.