Minnesota cabin owners could see the end of their statewide property taxes under a proposal by House Republicans, as legislators dive into a hotly contested issue involving thousands of residents with seasonal property.
The subject has become increasingly divisive as cabin owners around the state intensify their lobbying effort at the Capitol to shift some of the financial burden off their seasonal properties. The tax, imposed in 2002, generates nearly $44 million in state tax revenue from about 120,000 properties. “We’re not opposed to paying taxes,” said Nyle Zikmund, 57, of Blaine. “We’re just opposed to paying an unfair share.”
Skepticism runs deep at the State Capitol, however. Some legislators say the proposal is merely a tax break for wealthy Minnesotans who can afford two homes. Cabins in upscale lakefront communities around the state could potentially qualify for the tax reduction.
The proposal lowers taxes for cabins, “but not a single dime of property tax relief for homeowners, which is really weird,” said Rep. Paul Marquart, DFL-Dilworth, the Democratic leader on the House Taxes Committee. “You could have a senior citizen in East Grand Forks not see one dime in property tax relief, yet someone in North Dakota, if they owned a lake cabin in Minnesota, they’d see significant property tax relief.”
Cabin owners and seasonal property owners are trying to undo a tax change enacted under former Gov. Jesse Ventura.
Since 2002, owners of seasonal recreational property have paid taxes under the statewide business property tax, which includes commercial and industrial property. It included an automatic inflation adjuster that has increased the amount cabin owners pay.
Higher rate than houses
The tax revenue in question does not pay for local needs, but instead goes straight into the state general fund to pay for everything from parks to nursing homes to public schools.
The statewide tax means that cabins and seasonal properties are taxed at higher rates than houses, which cabin owners say is not fair.
Zikmund and his four siblings inherited a cabin on a 40-acre parcel accessible only by boat on Namakan Lake in northern Minnesota.
It has been in his family for three generations.
He and his siblings recently met to pick their cabin dates — and discuss the property’s costs. “The tax bill is our single largest bill,” he said.
The state’s tax collections from the measure have gone up 39 percent since 2002, when the seasonal recreation property tax generated $31 million for Minnesota tax coffers.
Jeff Forester, executive director of the Minnesota Lakes and Rivers Advocates, formerly the Minnesota Seasonal Recreational Property Owners Coalition, said that as the automatic inflater began taking effect, it began to make property taxes unaffordable for cabin owners on fixed incomes.
The advocacy group conducted a survey eight years ago and found the average cabin owner was around 62 and the average household income was just shy of $60,000 annually, which was pretty close to the statewide average.
“If you can’t afford the tax, then you’re forced to sell,” Forester said. He said that as cabin properties are sold, the property is then developed, leading to a reduction on water quality on the lakes.
Increasing lakeshore development has also caused local property tax rates to rise, Forester said.
“Every time one of those properties was bought and redeveloped, the effect was that everyone’s property tax rates rose,” he said.
Forester and other cabin owners have a sympathetic ear in House Taxes Chairman Greg Davids, R-Preston.
Davids said he would like to see the statewide property taxes on cabins repealed, and eventually phase out the statewide business property tax entirely.
“I would say overall that taxes are too high,” Davids said. “Any place where I can see to reduce that, I will. There’s a lot of middle-class homeowners that own cabins.”
Marquart said he favors tax breaks for homeowners and farmers before cabin owners. To do otherwise, he said, “that’s not fair and that’s not right.”
Davids acknowledged that in his tax bill, homeowners would not necessarily see tax cuts.
“Some rich cabin owner on Lake Minnetonka is going to get a [cabin tax] reduction and that’s tough to justify,” Davids said. “But I’ll take the number of cabin owners that are considered middle class and give them a break any day.”
The political battle comes at a great time in state finances.
State leaders are savoring a projected budget surplus of more than $1.2 billion, and the state’s rainy-day fund is at record levels.
Davids said he doesn’t want to get lost in a debate over who deserves tax reductions.
“There are some folks that maybe don’t need a break on their property taxes, but there are a lot of them that do need it,” he said.