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Hemorrhaging Homesteads: Projecting 2012 Property Tax Increases

October 17, 2011 By Matt Entenza, Senior Fellow and Founder

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Homeowners, renters, business owners, and farmers, nearly everyone should expect to pay more in property taxes next year, despite conservatives’ “no-new-tax” promise.

Conservative-crafted fiscal policy, enacted during Minnesota’s 2011 Special Legislative Session, cut more than $630 million in property tax aids and credits, including eliminating the Homestead credit, which provides property tax relief for middle-class Minnesotans.

As a result, local property taxes are projected to rise statewide by $376 million dollars in 2012, or about 4.6 percent, according to nonpartisan House research. The Twin Cities, suburban middle- and working-class communities and much of greater Minnesota will be hardest hit, with many seeing property tax hikes near 6 percent, according to House research projections.

For a detailed look at the property tax impacts in your particular region of the state, go to the online supplement of this report.

Respected Minnesota economists echoed progressive policy advocates in calling for a fair and balanced approached to solving the budget deficit. Instead, the conservative-controlled legislature shifted the state’s deficit burden to the state’s middle-class to protect Minnesota’s richest.

These cuts continue a long-term trend, where conservatives have slashed aid to Minnesota cities and counties, forcing local leaders to cut services and raise property taxes and fees, giving the state a more regressive tax system.

 

 

By fiscal year 2013, the state will have cut $3 billion in aids and credits to local governments, using constant 2011 dollars.

To restore Minnesota’s fiscal fairness, MN2020 calls for policymakers to:

  • Abandon failed “no-new-tax” policy pledges that protect the richest Minnesotans from paying an effective tax rate more in line with middle-class Minnesotans.
  • Restore the Homestead Credit.
  • Return to a fair and balanced approach in solving our state’s budget deficits.

download online supplement here

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8 Comments:

  • Andrew Olson says:

    October 17, 2011 at 3:00 pm

    Property taxes are not regressive.  In 2008, the richest 10% of households (earning more than $130k) paid 27.5% of the residential property taxes and 57% of the income taxes.  The bottom 50% of households (earning less than $42K) paid 20% of the property taxes and 3.5% of the income taxes.  The income tax is certainly more progressive, but that doesn’t make property taxes regressive or unfair.  The rich guy in Woodbury doesn’t typically benefit from the library or police in the rural communities or urban cities that have grown dependent on his money.  On the occasion that he is in those cities, he pays the city sales taxes.  It seems to me that the Minnesota Miracle has not led to economic growth in the cities that benefit.

  • Ginny says:

    October 18, 2011 at 10:41 am

    Overall statistics like andrew’s leave out one part of the equation: the homeowner. I am a homeowner, retired, not wealthy, and my property taxes have gone up every year in the last decade. I have an income that is static and will not—cannot—increase.
    The property tax is based on the value of the property, not the income of the homeowner. So it is extremely regressive.
    Next year, it will be worse for most of us. The homestead tax is eliminated—how many people know that—and in its place is substituted a formula that will almost surely result in higher property taxes because it lowers revenue. The Republicans pushed this through, although some deny it and blame the Governor.
    It appears to me that the conservatives, like Andrew, leave out the human being in all of these equations. Statistics (the lying kind) may be correct as far as they go. Their effect on all Minnesotans is left out.

  • Ginny says:

    October 18, 2011 at 11:46 am

    What Minnesota Miracle? That was in 1971 when a Democrat, Wendell Anderson, was governor and we had prosperity and far more equity. We had an excellent education system, for one thing, and we did not have a deficit. Taxes were much higher, and everyone prospered.
    We certainly have had nothing to brag about in the last 10 years in terms of our funding for education—which is the key to prosperity—and other basic governmental functions. Taxes were lower and lower, though.

  • Andrew Olson says:

    October 18, 2011 at 11:52 am

    Ginny, I wasn’t disputing the claim that property taxes are rising.  I was simply correcting the idea that property taxes are regressive.  They would only be regressive if the rich tended to less property and smaller homes than the poor.  This is obviously not the case.  The taxes on cigarettes could be considered to be regressive as the poor pay the majority of the tax as they are the ones who smoke.  The taxes are there for health reasons, but it’s certainly an effective tool of taxing one particular group of income-earners, as the yacht tax would be for the rich.
      I would certainly support cuts to local government spending, property tax cuts and perhaps a state law preventing the elderly and disabled from being taxed out of their homes.  That said, it’s fair to mention that your property tax was being kept artificially lower in years past through the homestead credit.  Since people generally think of their property taxes as high enough as it is, I would think majorities would also favor reducing government services before raising property taxes.

  • TONY says:

    October 18, 2011 at 12:25 pm

    In MN, people making under $32000 pay about 11-17% of their income in state & local taxes, people over $400k pay 8%. Property taxes are regressive in that the poor & middleclass pay more or their income in taxes than the wealthy. As far as reducing county services more than they already have been, as a county official, when I ask people which road or bridge I shouldnt repair & which social service I should cut, about 80% or more including a majority of Repubs say none. These taxes pay for the support system that we all(rich & poor) rely on. We have cut to the point where we have reached a quality of civilization level. The systems that allows us to have a “middleclass” are quickly disappearing.

  • Andrew Olson says:

    October 18, 2011 at 1:01 pm

    In order to be a true regressive tax, the tax rate must decrease as the amount subject to taxation increases.  The rich pay higher property taxes despite using fewer government services than the poor.  They’re more likely to send their kids to private schools and less likely to use county social services, or commit crimes.  To start off by arguing the rich don’t pay their “share” is simply dishonest.  They pay more than their fair share, you simply want them to pay more. 
      You may have a different idea of quality of civilization level than your taxpayers do.  Stories about the rising cost of government employees healthcare, pensions and the hiring of $100k bicycle coordinators reinforce this difference between government employees and the taxpayers.

  • Jack says:

    October 4, 2012 at 2:06 pm

    I am wondering if we will see a similar document for 2013 homestead property taxes? Or are they not increasing next year?

  • Rachel says:

    October 4, 2012 at 2:16 pm

    Jack,

    2012 didn’t really see any major changes to MN’s tax laws. At this point, there’s not a whole lot to report, but we’ll always have an eye on this issue—if things DO change in any significant way, you can count on us to write about it.

    Thanks for reading!
    Rachel

    Communications Specialist, MN2020