LET We can't allow reform in property taxes to be reversed

By Bill Blazar

After years of planting the seeds of change, taxpayers opened their May 15 property tax bills to discover that property tax reform had taken root in Minnesota. In most areas of the state, property owners saw significant reductions in their taxes, primarily due to the work of the 2001 Legislature.

Legislation that simply bought down property taxes has passed the Legislature on a regular basis over the last two decades. Cutting property taxes of constituents is good politics, and legislators deserve the credit for trying to hold down the effects of skyrocketing local spending over the last two decades.

The 2001 property tax reform legislation was different. Yes, property taxes dropped -- an average of 10 percent to 20 percent for homeowners, and 5 percent for business property. The Legislature went one step further, however, and changed the structure of our property tax system. The result is property tax "reform," not just another buydown.

The reform eliminates the statewide education levy, long used to equalize revenue among school districts with differing amounts of high-valued property. General state revenues, collected primarily from personal income, corporate and sales taxes, will now be used to fund all local schools districts with a relatively equal stream of dollars.


Now, the tax dollars that property taxpayers provide for schools -- primarily for general operating funds and building construction and repair -- will be left to local decision-making. Keeping local dollars under local control creates more accountability for elected officials since taxpayers can monitor how their money is being spent -- the best way to improve the performance of school districts and local governments.

A second accountability measure in the 2001 legislation reduced the difference between the tax burdens borne by homes and business property. Unlike many other states, Minnesota taxes $100,000 of business property at a far higher rate than a $100,000 home. In doing so, Minnesota has created a taxing system where "voting properties," such as homes and farms, have been shielded from the full effects of local tax increases because "non-voting" properties absorb much of the levy increases. Before reform, the difference was almost two to one, i.e., business had to pay twice its proportionate share of any tax increase.

Businesses will still pay a substantial and disproportionate share of local property tax increases but homeowners will pay a more proportionate share of those tax increases than they did in the past. That should also improve accountability, as local officials are forced to justify tax increases to the people who elected them.

Unfortunately, some legislators and local elected officials are talking about repealing the 2001 reform. Local government groups have been quietly lobbying legislators and other candidates for changes in the legislation.

Reversing this reform would be a serious relapse. Reform has grown in Minnesota because homes, business, and farm owners planted those seeds of change. These voters must be involved. They should tell legislators and candidates that they expect property tax reform to be protected. They should participate in the budgeting decisions of cities, towns, counties and schools. This process starts in early September when local governments are required to set their minimum levy increases and concludes in December final levies are set. The public can visit www.standvour-around.ora to learn more about property tax reform.

Blazar is senior vice president of the Minnesota Chamber of Commerce.

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