Minn. House GOP to push property tax relief
Four months after Minnesota lawmakers made major changes in state tax policy that repealed a property tax relief program, House Republicans unveiled a proposal Monday to cut property taxes for some businesses and residents.
State Rep. Greg Davids, R-Preston, chairman of the House tax committee, insists that the new $80 million package of property tax relief for homeowners and businesses is not connected to any tax increases that resulted from the earlier legislation.
Last summer's special-session budget agreement ended a state government shutdown and erased a $5 billion deficit. The deal also repealed a property tax relief program called the Market Value Homestead Credit and created a new homestead exclusion for houses valued under $413,800.
Cities and counties reluctantly agreed to the change but later warned it would result in local property tax increases — and officials in some Minnesota communities did raise taxes to make up the difference in property tax collections.
Create a More Connected Minnesota
MPR News is your trusted resource for the news you need. With your support, MPR News brings accessible, courageous journalism and authentic conversation to everyone - free of paywalls and barriers. Your gift makes a difference.
Davids now proposes to lower property taxes for all businesses and for the homeowners who saw their 2012 tax bill rise by 12 percent or more. But Davids contends his proposal is an "enhancement" of the earlier legislative action, not a correction.
"Because of what we did during the special session — I'm often asked the question, 'does that automatically increase property taxes? And the answer is no," Davids said. "Could it? Yes, it could."
But Davids contends most local governments are well-positioned to absorb the changes, and could actually lower taxes through additional spending cuts. Under his new plan, the targeted homeowners would have 90 percent of their property tax bill eligible for a state refund, but for just one year. Commercial and industrial properties in Greater Minnesota would see an 18 percent reduction, while the Twin Cities metro area would receive a 4 percent cut.
"I didn't sit there and say 'well, we're going to rewarding this person or that person,' " Davids said. "It's the same for everyone. It's straight across the board. Every business in Minnesota is going to see a decrease in property taxes when this bill becomes law."
Davids said House Republicans will find a way to pay for the $80 million tax package, even though the state will likely have another budget hole to fill. He estimates the next state economic forecast will show as much as a $750 million deficit in the current two-year budget. Still, Davids said enough savings can be found in other areas of government to cover the tax proposal.
"We can't say that it's going to be paid for by this, this or this," he said. "But I will say it's a top priority of our caucus, and we will get some of these provisions through."
Davids said he thinks other tax proposals will also be on the table next session, including a proposed freeze on local property taxes. But he said Democratic Gov. Mark Dayton's proposal for an income tax increase on top earners will not get a second look.
House Democrats were quick to criticize Davids and the GOP plan. State Rep. Paul Marquart, DFL-Dilworth, said he blames Republicans for the elimination of the Market Value Homestead Credit, and the resulting tax increases that many property owners are just now learning about. He said the GOP could have lowered property taxes last year simply by accepting Dayton's budget plan.
Marquart said he thinks Davids is trying to create a diversion from the local tax bills that will soon arrive in mailboxes.
"I do believe there's going to be big property tax increases when those statements come out," Marquart said. "Homeowners and businesses and farmers are going to see the result of Chair Davids and the Republicans' tax plan from this year. I do think the proposal today and the timing of the press conference was to try to divert attention from that. There's no question about that."
Marquart and other Democrats will propose legislation next year to try to restore the homestead credit and the $538 million in property tax relief it provided every two years. They too have been unable to identify a funding source.
It is difficult to quantify the exact impact of this year's property tax change. But when MPR News asked local tax officials in more than two dozen places how taxes were affected on a median value home, more than three-quarters said preliminary estimates show taxes rising in 2012. The increases occurred even after officials took into account a decline in values in most places.
