In Minnesota, we’d bet that property taxes rank second only to the weather in the volume and vehemence of complaints they generate. There’s no sign of tiring of the topic, either. Several Minneapolis mayoral candidates tell us they’ve been surprised by how often they hear from voters that property taxes are painfully high, and must not go higher.
We suspect that Minneapolitans aren’t alone this year in saying “enough’s enough.” The sentiment is well justified, numbers released last week indicate. The state Revenue Department reported that Minnesota property owners and renters have endured 11 straight years of property tax increases.
From 2003 through this year, the total increase, net of refunds for those with low incomes, comes to $3.6 billion — an 86 percent climb. Annual statewide bumps ranged from $92 million in 2011 to $507 million in 2006.
That long uphill run is about to end, the same Dayton administration analysis said. It projected that in 2014, property taxes after credits will drop $121 million in aggregate from their 2013 level. The reasons:
• State aid to cities, counties and townships rose this year, by $80 million, $40 million and $10 million, respectively. That only goes partway toward replacing funds that were cut in the last decade. For cities, for example, it brings Local Government Aid back to $507 million next year. That’s the first significant LGA boost since 2005, but it’s still $57 million less than cities received in 2002.
• Local governments were made exempt from the sales tax, shaving 6.5 percent off the price of goods and taxable services those governments purchased. That’s expected to save them $172 million next year.
• Two refund programs for lower-income renters and homeowners are also growing. The old property tax refund got a new name — the homestead credit refund — and a new lease on life with a 27 percent increase in average refunds and more homeowners eligible. The renters’ credit will provide refund checks 25 percent larger to 30,000 more tenants than received them last year, the administration projects. (To find out whether you qualify, visit the Revenue Department’s website.
The refund increases are particularly worth cheering. They will help keep low-income people in their homes and spark local economies by giving refund recipients more to spend. To the extent those programs help stabilize marginal neighborhoods, they reduce other public costs of poverty.
• The Legislature imposed a 3 percent limit on the size of local levy increases in 2014, putting a ceiling on local officials’ appetites for more spending.
The administration’s $121 million projected cut for 2014 strikes us as low. It does not factor in new state spending on E-12 education, which includes a state takeover of a portion of school levies in some districts in which voters have opted to tax themselves for school operations.
DFL Gov. Mark Dayton’s Republican critics were quick to note that the projected rollback is a modest benefit from a tax increase on smokers and high-income earners of more than $1 billion per year. This newspaper would have preferred a different array of new taxes. We agree that property tax relief alone does not justify a tax increase that large. But the weakened condition of other public sector services did.
That includes the responsibilities Minnesota consigns to its local governments and finances with a mix of local property taxes and state aid. When that aid was cut in the last decade, city and county officials didn’t just raise property taxes in response: They also squeezed police, fire and infrastructure budgets to a degree that cannot continue indefinitely without putting public safety and economic vitality at risk.
By the Dayton administration’s estimate, beefing up those budget lines will consume half of the new money the Legislature is sending local governments. The other half will reduce property tax burdens, they project. Yet nothing in state law compels local officials to make it so. Local circumstances vary widely, and in some cases could warrant flat or even increasing levies next year.
Nonetheless, as city and county officials move into the 2014 budget-setting season in coming weeks, they would do well to use the administration’s projection as a guideline. In most cities and counties, about half of the new money from the state ought to lead to lower property taxes. Citizens would do well to monitor local decisionmaking with that standard in mind, and seek explanations for major deviations.
Local government programs may be hurting, but property taxpayers around the state are too. They pay an unforgiving tax that comes due regardless of whether incomes rise or fall. Property owners and renters shared the pain of the last decade as a “no new taxes” regimen at the Statehouse and a nasty recession combined to squeeze local governments. As that pressure eases, property taxpayers deserve to share the benefit as well.