'No new taxes' is a slogan -- not reality

  • Updated: June 1, 2011 - 8:42 PM

Once again, GOP budget would lead to bigger property tax bite.

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Raise taxes or not? That's the not-quite-accurate way that some Minnesotans describe the quarrel that has held up biennial budget-setting at the Capitol this spring.

Look deeper at the implications of the positions staked out thus far by DFL Gov. Mark Dayton and the Legislature's GOP majorities, and the fight takes a different frame.

It's better understood as a dispute over whether to raise income taxes on the wealthy, as Dayton wishes, or property taxes for nearly everyone else.

That makes this year's impasse a new verse in an old song at the Capitol. From its birth in the 1940s, the DFL has been the anti-property-tax party.

DFLers favor financing government with the income tax, based on taxpayers' ability to pay. The GOP has resisted income taxes.

Former Gov. Tim Pawlenty demonstrated that, in the Republican vernacular, "no new taxes" means no boost in state tax rates.

Local taxes rose dramatically on Pawlenty's watch, spurred by state aid cuts but not easily pinned on state politicians. Local elected officials were cast as the heavies who pull the tax trigger.

That political reality, dressed up as a preference for local control, may explain why today's Republican legislators shrug off the property tax implications of their budget bills while mightily opposing Dayton's income tax alternative.

To be sure, Dayton's proposed income tax increase is larger than the forecasted GOP property tax increase -- by about $1.2 billion over the next two years. That's because he calls for fewer reductions in state services.

The governor's latest proposal seeks $1.8 billion, to be paid by the top 2 percent of the state's earners.

By comparison, the GOP budget bills would raise property taxes statewide by an estimated $395 million during calendar 2012. (Local and state government fiscal years don't coincide.)

In addition, the GOP would deprive low-income renters of $185 million in 2012-13 through cuts in the renters' credit.

The GOP hit would land hardest in Minneapolis, St. Paul and Duluth, for several reasons. The GOP bills would wipe out all of those cities' local government aid allotments over the next three years. No other cities are singled out in this way.

In Minneapolis, the loss in just the remainder of 2011 would be $40 million, or about 11 percent of the city's annual operating budget, with this year's budget already half spent.

In addition, proposed GOP cuts in health care and income support for the poorest adults would push costs onto county balance sheets. The state's three largest counties -- Hennepin, Ramsey and St. Louis -- would almost certainly see substantial property tax increases as a result.

Other counties and regional hub cities would also be pinched by the GOP bills, and can be expected to respond by both cutting services and bumping up property taxes.

No tax is popular. But the property tax is detested for good reason. It's unrelated to income and unforgiving when misfortune strikes.

It can squeeze the elderly out of homes and, particularly in Minneapolis, sends young families packing. Republicans should acknowledge that their plan would cause real and painful tax consequences.

It should also be noted that Republicans fight a higher income tax top rate for sound reasons of business competitiveness -- reasons Dayton should take to heart.

If both sides in the budget battle would concede that the real question before them is "Which tax?" they might also see that they have more and better revenue-raising options than those they've brought to the table.

The state's too-narrow sales tax base could be expanded. Tobacco and alcohol taxes could climb.

Do those things, and the ill effects of both a higher income tax and higher property taxes -- and of a government shutdown after July 1 -- could be avoided.

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  • PROPERTY TAX FACTORS

    Gov. Mark Dayton cited these potential property tax raisers in the bill he vetoed last week:

    •A 30 percent reduction in local government aid to cities over the next two years.

    •A 19 percent reduction in county program aid in the same period.

    •Elimination of market value homestead credit for low-valued homes.

    •Eliminating renters' credit for 72,000 renters and cutting it an average of 45 percent for more than 300,000.

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