Hamilton and Sheran: Property tax assertions were misleading

  • Article by: ROD HAMILTON and KATHY SHERAN
  • Updated: March 13, 2011 - 4:11 PM

The tax is based on property values, not income, and people make choices about where to live.

Counterpoint

In his March 6 commentary "A myth-busting look at property taxes," D.J. Tice asserted that suburbs bear the brunt on property taxes, citing a little-known report to assail cities receiving property tax relief through the local government aid program without taking a harder look at the whole story.

The proposition that suburban taxpayers are being treated unfairly was based on data found in the "Voss Report", a study by the state Department of Revenue that compares income to property taxes paid.

 But as is so often the case, numbers can be misleading.

The Voss report shows that many suburban taxpayers do pay a higher percentage of their income on property taxes. Looking at this one statistic, it sounds reasonable that suburban taxpayers are being mistreated, but that does not hold up once you dig deeper into the report.

Like it or not, property taxes are based on property values, not income. The main comparison Tice made was between taxes on properties in southwest Minnesota and properties in the southwest suburbs, so we will concentrate on those two areas.

The Voss report shows that median homeowners in a southwest suburban city like Eden Prairie live in homes four times more valuable than property owners in a rural city like Worthington, and have twice the income.

Since property taxes are based on value, it makes sense that the owner of the $76,000 median-valued home in southwest Minnesota pays less than the owner of the $325,000 median-valued home in southwest suburbia.

In fact, homeowners in southwest Minnesota actually pay a higher amount of property taxes compared with the values of their homes.

People have a choice in where they live. While the cost of homes is higher in the southwest suburbs, people who live there are willing to spend more of their incomes on high-value homes in order to live in more-desirable neighborhoods.

Median homeowners in the southwest metro live in homes with values 3.17 times higher than their median household incomes of $100,448. In southwest Minnesota, median homeowners live in homes with values only 1.58 times higher than the median household income of $48,952.

Suburbanites are also more willing and able to put additional money into their schools, another choice they have made.

In 2008, the base year of the Voss report, metro school districts had triple the voter-approved excess levies than did districts in greater Minnesota. Those homeowners weren't aggrieved; they agreed to ratchet up the cost of their property taxes on their own.

Most disturbing, Tice uses the Voss report to attack the local government aid program, which goes only to cities. Yet the report includes more than city tax data; it also includes property taxes on schools, counties and other taxing jurisdictions.

City property taxes make up only 29 percent of the property taxes paid to local units of government, so the Voss report cannot and should not be used to assess the LGA program.

The issues LGA addresses have nothing to do with the portion of income a homeowner pays for property taxes. The purpose of the program is to reduce inequalities between property-poor and property-rich cities. It helps businesses as well as homeowners and is critical to the economic well-being of many cities.

Tice takes another wrong turn when he questions whether we should continue to "shower rural Minnesota governments with state tax dollars" while those living in property-rich suburbs get relatively little state aid.

Unfortunately, he is wrong on both sides. Local government aid to cities has been cut 25 percent from 2002 to 2010, while property tax relief programs "showered" on suburbs have remained unscathed.

When the state took over transit funding in 2002, it provided millions of dollars of property tax relief to suburban homeowners, and that has not been cut. When the state took over school levies in 2002, it provided hundreds of millions of dollars in property tax relief to suburban homeowners, and that has not been cut.

When the state changed the income eligibility for the circuit breaker, which provides relief for homeowners paying too much of their incomes in property taxes, it channeled millions of dollars to relatively high-income households in high-valued suburban homes.

These forms of state aid are just harder to recognize as property tax relief programs and aren't seen as such an easy target as the LGA program.

LGA should be a priority, not a target for cuts. It is important to the economic health of many cities and the entire state.

The state's priority now should be job creation and economic recovery. Suburban homeowner property tax relief does not accomplish that goal, but it is provided by the local government aid program.

It is time to start fully recognizing the value of the property tax relief program that has done so much to make all parts of our state, not just the metro area, competitive in attracting job-producing businesses.

Rod Hamilton, a Republican, represents Mountain Lake in the Minnesota House. Kathy Sheran, a Democrat, represents Mankato in the Minnesota Senate.

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  • Response to 'Counterpoint'

    Wednesday March 30, 2011

    I thank Rep. Hamilton and Sen. Sheran for their civil and substantive rebuttal. But, with respect, their argument strikes me as something of a heads-I-win-tails-you-lose proposition.

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