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'08 property taxes? Up 5 to 10 percent, according to study
The lower figure is for the metro area, the higher one for outstate Minnesota. The report raised the temperature of discussions in the Legislature over the fairness of the tax system.
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The volume rose on the perennial Capitol debate over property taxes Tuesday with release of a report showing that homeowners' tax bills in the Twin Cities area are expected to rise by about 5 percent in 2008 and by closer to 10 percent in outstate Minnesota.
The increase for metropolitan homeowners would be the lowest percentage jump in more than five years, according to projections released by Minnesota House Research. But the projections fueled familiar partisan rhetoric at the Legislature about six consecutive years of increases above the rate of inflation on most types of property.
"It's all pain, and I don't know how you measure that," said Rep. Paul Marquart, chairman of the Property Tax Relief and Local Sales Tax Division of the Taxes Committee.
Marquart, DFL-Dilworth, echoed a party refrain heard ever since Republican Gov. Tim Pawlenty took office and pushed through big cuts in local government aid: "The debate is over as to whether we've had tax increases."
While Pawlenty claims to have kept a lid on taxes, that applies only to state taxes, DFLers contend, because property taxes and fees have increased by the billions.
The DFL majorities in the House and Senate have put property tax relief at the top of their agendas but have yet to provide details.
Republican House Minority Leader Marty Seifert of Marshall, who had a news conference after Marquart and DFLers held an event to decry what they called a "record" increase, said DFLers' approach to providing relief is misguided. They propose increasing various local government subsidies without imposing specific limits on tax levy increases and local government spending.
"We need to get control mechanisms in place," Seifert said. Republican proposals that would require cities to use all their local government aid for public safety programs, and a Pawlenty proposal to limit local increases, have been rebuffed, he said.
DFLers also have been irresponsibly vague about how they would raise the state revenues necessary to provide meaningful relief, he said.
Values, tax base, state aid
The value of an average home in outstate Minnesota in 2008 would be set at $164,100, according to the report, and would incur $1,557 in property tax, or 0.95 percent of value. In the metro area, average value would be set at $283,500 and incur $3,068, or 1.08 percent.
In general, over the last few years, the highest percentage property tax increases have fallen on lower-valued homes, and the burden has been reduced on higher-valued homes and business property, DFLers contend.
Property values tend to be considerably lower outstate than in the Twin Cities, and the projections for 2008 once again show larger percentage increases for non-metro areas, particularly in smaller towns.
Stephen Hinze, a legislative analyst for the nonpartisan House Research office, said the higher outstate projections for 2008 can be attributed in part to the fact that valuation increases in the Twin Cities have fallen off while market values are rising faster in the rest of the state.
Another factor that takes the pressure off Twin Cities homes is a larger commercial-industrial property tax base, Hinze noted. Business property is taxed at about two to three times the rate on residential property, or between 2 to 3 percent of the market value annually, compared with about 1 percent for homes.
A third factor is the greater reliance on local government aid by outstate local governments. Although the large reductions in 2003 have been partly restored, Marquart said, local government aid levels are still below the 2002 levels.
He said a DFL proposal to crack down on loopholes and tax avoidance could raise as much as $250 million, much of which could be used for property tax relief.
Seifert said the enforcement is likely to produce less than $200 million and would do little to offset the total projected increase in property tax collections of about $600 million.
Dane Smith • 651-292-0164 • rdsmith@startribune.com
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