Lori Sturdevant: As property taxes bear down, pair offers a leg up

Two DFLers have a plan that could appeal to both parties, even in a polarized political climate.

By LORI STURDEVANT, Star Tribune

Last update: April 26, 2008 - 4:44 PM

For the last few years, rising residential property taxes have been the weather issue at the Minnesota Legislature -- the thing everybody talks about, but nobody does much about.

It's not for lack of trying, or lack of ideas. But each party's pet idea for controlling property taxes is anathema to the other, and this crowd tends to cling to its pets like toddlers to their favorite toys.

Against that backdrop last week came a new property tax relief idea from House DFL tax chair Ann Lenczewski and property tax division chair Paul Marquart. It came with a label not often attached to DFL tax proposals: "revenue neutral."

The idea featured a few other surprises: It did not involve a state tax increase. (That was tried and vetoed last year.) It did not involve a huge increase in aid to local governments (never popular with Republicans, who tend to favor local control more in principle than in practice). It did not rely on unsustainable one-time money gimmicks (which are in vogue in both parties this year but are detested by fiscal prudes, including editorial writers).

Lenczewski and Marquart proposed to ease the property tax burden on homeowners least able to bear it, by putting the state's property tax refund program, or "circuit breaker," on steroids. It would bulk up state refunds to homeowners whose property tax burdens are disproportionately high relative to their incomes, making it big enough to block next year's expected property tax increases for a majority of Minnesotans.

The circuit breaker's growth would be funded by scaling down or eliminating the itemized state income tax deduction for property taxes and the market value homestead credit, which is unrelated to the size of either a homeowner's tax bill or income.

That would mean higher taxes for homeowners with high incomes and comparatively low property taxes -- particularly those with household incomes after deductions of more than $200,000. They're only about 5 percent of Minnesotans. But their ranks may include more potential campaign donors than legislators and Gov. Tim Pawlenty are willing to afflict in an election year.

Yet the high-end earners who would lose a prized tax deduction under this plan should be advised that the existing state-plus-local tax structure in Minnesota grants them most-favored-taxpayer status. The tax cuts of 1999-2001 produced a fairness gap that favors the rich, and it's growing. The latest calculations say top earners pay about 9 percent of their incomes in state and local taxes, compared with 12.5 percent for middle earners.

Lenczewski is a zealot about arresting that regressive trend. In that sense, her proposal is true to eight decades of emphasis by the DFL or its Farmer-Labor antecedent on basing taxation on ability to pay.

But in another sense, Lenczewski and Marquart are breaking with DFL orthodoxy. They favor direct aid to taxpayers over local governments. That's an implicit acceptance of Republican arguments about the virtue of putting money into individual pockets and of exposing more taxpayers to the full impact of local government decisions.

That bow in the GOP direction ought to give their idea at least a remote chance to get through Gov. Tim Pawlenty's "no new taxes" filter and become law. It should, that is, if easing property tax pain for those who are really hurting outweighs the election-year thrill of stomping on any idea that originates with the opposite team.

What ought to be clear to legislators is that the economic hurt in Minnesota is growing, and their election certificates oblige them to do something about it, no matter whether they sit in the majority or the minority caucus.

People whose incomes are falling are particularly burdened by the 82 percent average increase in homeowners' property taxes that's come on Pawlenty's watch. They can't afford the 7.7 percent increase that's forecast for next year. Helping people in tough circumstances stay in their homes is what Minnesotans looked to a Farmer-Labor governor and a Conservative Legislature to do 75 years ago, and they delivered. Today's divided government owes its constituents no less.

Lori Sturdevant is a Star Tribune editorial writer and columnist. She is at lsturdevant@startribune.com.

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