As one of the sources for the Dec. 27 article “Plan to ax cabin tax gaining traction,” I am compelled to write and set the record straight. The headline was highly misleading, and the subhead, “A House GOP proposal could eliminate property taxes for seasonal homes,” only added confusion.
Of course, neither statement is accurate. There is no “House GOP proposal” to “eliminate property taxes for seasonal homes.” No group, including the one I represent, Minnesota Lakes and Rivers Advocates, is pushing such a plan.
Cabin owners pay local property taxes like any other property class, and there is no legislation anywhere that would end that. But one additional portion of the property tax levy they pay — the so-called statewide business property tax, which is levied against commercial industrial property and cabins — is up for reform in 2016.
These reform proposals were put forth last session by both Republicans and Democrats in both the House and the Senate. Efforts to reform the statewide business property tax on cabins are bipartisan.
The statewide business property levy was passed in 2001 under the administration of Gov. Jesse Ventura at a time when the Republicans controlled the House and the Democrats held the Senate.
There was no public-policy need driving the creation of the tax, no connection between a user group and a tax to fund a specific activity, and no behavioral change being sought. This issue isn’t Democrat vs. Republican or rich against poor.
Instead, in the final hours of the 2001 legislative session, policymakers discovered a $500 million hole in Ventura’s “tax reform program.” They created the statewide business property tax to “backfill” this hole. A portion of the revenue was to go to local communities for education, but in the year following passage, all of the revenue was redirected away from local schools and into the state general fund. This new tax included an automatic inflater and has grown to nearly $1 billion annually.
In the years of perpetual state government red ink, there was no way to reform this additional tax on cabins and businesses. Last legislative session, both Republican and Democratic legislators, in both the House and the Senate, came forth with a variety of bills seeking to reform the statewide business property tax. Some would have ended it completely; some would have phased it out over time; some would have cut it way back; others would have ended the inflater or restructured the tiers.
Here is the point: There is broad, bipartisan consensus that the tax is not only unfair but has a host of unintended consequences that should be remedied:
• This is a state property tax that provides no direct revenue to local governments.
• There is no connection between the tax and ability to pay it.
• Cabins pay local taxes already; the business tax is on top of that.
• The business tax has no policy justification.
• There have been no bills introduced that would “end” cabin taxes. No advocacy group in the state has ever advocated that seasonal recreational property owners should not pay local property taxes.
Jeff Forester is executive director of Minnesota Lakes and Rivers Advocates.