Missing tax credit should be restored

While the Minnesota Legislature, controlled by Republicans, boasted it did not raise taxes last session, it eliminated the market value homestead credit that could increase most homeowners’ property taxes by varying amounts on taxes payable next year.

For 44 years, the state has partnered with local government in giving relief to property taxpayers in the form of a credit.  That credit was then used to offset a portion of the property tax. 

Unless city councils, school boards and county boards cut spending in the amount of the credit, almost every homeowner will pay all or part of the eliminated credit.

It is unrealistic for local governments to cut expenses to make up loss of the credit to protect property taxpayers from loss of the credit.

Even if local tax levies were not increased by $1, the elimination of the tax credit could result in a higher property tax payable next year.

That deduction could vary depending on the value of the property. Those with a home valued at $76,000 or less will not have to pay more, while those with homes over that amount will pay more depending on the value of their property, up to $414,000.

What may not be realized is commercial and industrial property taxpayers also will be hit with the loss of the credit, because lower-valued homestead properties under the law will be excluded, thus lowering the tax base and increasing the rate.

All this comes about as local governments are struggling to make ends meet, already feeling the loss of local government aid and dropping property values.

The Legislature cleverly will lay the blame on local governments, saying they, not the Legislature, determine the amount of local taxes.

In effect, the state government is saving $261 million a year in cutting out the credit and forcing local property taxpayers to pick up the tab.

Initiated by the Republican legislators, removing the homestead credit became a part of the settlement that brought an end to the government shutdown.

When the deal eliminating the credit was first approved by both houses of the Legislature, Gov. Mark Dayton vetoed it.  While it was signed into law by him, he said he did not agree with it.

Republican leaders say they didn’t increase property taxes; they merely reformed the system, claiming the state never did fully reimburse the credit.  They contend not fully reimbursing the credit resulted in local governments never knowing what the credit reimbursement would be, which in turn made budgeting difficult. It should be pointed out that the state paid 95 percent of the credit in past years.

Two DFL legislators, Ann Lenczewski and Paul Marquart, will introduce legislation to repeal the homestead credit elimination for 2012.

Property taxpayers will have an opportunity to learn what the increase will be projected to be for 2012 in two months, when the Truth in Taxation statements will be sent. Each county is obligated to schedule a hearing on the Truth and Taxation statement. 

No doubt complaints from property taxpayers will and should bring about the repeal of this unwarranted measure and refute the claim that the Legislature did not increase taxes for next year. — ECM Editorial Board  

(Editor’s note: This editorial is a product of the ECM Editorial Board. The Star News is a part of ECM Publishers Inc.)