When Gov.

Tuesday, August 07, 2001

When Gov. Jesse Ventura signed the historic tax relief and tax reform bill, Minnesota took a major step toward shedding the image of a high-tax, business-raiding state, said Dan Salomone, executive director of the Minnesota Taxpayers Association.

&uot;Tax cuts and reform are more than just politically popular. For Minnesota, they’re necessary to keep this state competitive with our neighbors, in my opinion,&uot; he said.

Salomone is one of many tax-policy experts across the state who likes the new tax bill, despite the last-minute compromises that allowed its passage. In the end, after an extended special session and threat of a government shutdown, the results look promising for taxpayers, Salomone said. The bill cuts property taxes by about $843 million next year and returns $791.3 million of state’s surplus to taxpayers through a sales tax rebate.

&uot;It’s a good bill. It contains a lot of good reform – reform that this state needs,&uot; Salomone said.

The department of revenue says the bill increases the simplicity and accountability of Minnesota’s property tax system and makes the property tax a truly local tax. Its key features include:

State takeover of the state-mandated general education levy,

now partly funded by local property taxes. Voter-approved excess

levies will remain locally funded.

Classification rate reductions. Tax rates for commercial

and industrial property are now at a roughly two-to-one ratio

to the residential rates. The ratio was nearly five-to-one a

decade ago.

Double-digit property-tax decreases for all classes of property.

Average property-tax reductions for the following classes (compared

with current law, but not including future market-value increases)

are:

Homesteads: 23 percent

Apartments: 25 percent

Farm homesteads: 25 percent

Seasonal/recreational: 12 percent

Commercial/industrial: 10 percent

Minnesota’s third consecutive sales tax rebate returns about $791.3 million of the state’s surplus to taxpayers by Labor Day. The amounts for the 2001 sales tax rebate average $232 for single filers and $512 for families and couples. Newly eligible Minnesotans include those with public pension income and tribal members.

One less publicized feature of the new tax bill, Salomone said, is the new $592 million statewide property tax, designed to ensure that certain property classes continue to fund schools. According to the Department of Revenue, businesses, utilities and commercial resorts are included in the new statewide tax and are also included in operating referendum.

Cabins also pay the statewide tax but are off the operating referendum. Farms and forestland are exempt from both the statewide levy and local operating referendum.

Though future growth in the statewide tax will be dedicated exclusively to education, Salamone said he predicts battles in future legislative sessions over the new tax.

&uot;It’s going to grow – all property-based taxes do – so you can imagine the attention it will get if budgets begin to tighten.&uot;

The tax bill also expands the property tax refund, with maximum amounts increasing to $1,500 from $500 and eligibility expanding to those with income of $80,000 from $71,700. Most of the relief will be targeted to those making less than $55,000 and will eventually yield $60 million per year in direct taxpayer relief.

Along with the property tax changes, the bill phases out Limited Market Value over six years, eliminates city Homestead Agricultural Credit Aid (HACA), and increases Local Government Aid (LGA) for cities.

Salomone said the tax reform was made possible by a governor who did not have to answer to a caucus or party machinery.

&uot;I think he just asked his people to give him the best bill they could, from a technical standpoint, and he got a good one,&uot; Salomone said. &uot;For the most part, the governor was able to maintain all the major features of that original bill, especially the rate compression and state takeover of the general ed levy.&uot;

No competing budget bills emerged during the session, Salomone said. Ventura managed to have enough attractive pieces in his bill to attract both parties.

&uot;I’ve never seen that before in all of my years in this state,&uot; Salomone said. &uot;Usually we’re looking at as many as three competing budget bills.&uot;

THE NUMBERS

Rep. Dan Dorman says preliminary estimates for tax cuts in the county are deep and wide-ranging. Though the individual tax bills will vary, homes, farms and apartments in the county will notice the following average reductions:

&160;Value

&160;% drop

&160;Homes

&160;$45,800

39.5

&160;$68,700

&160;39.5

&160;$91,600

&160;36.8

&160;$137,500

&160; 35.4

&160;Apartments

&160;$300,000

&160;36.5

&160;Agriculture

&160;Homestead

&160;26.8

&160;Non-Homestead

&160;19

Dorman said commercial and industrial property will also see an average 10 percent reduction, but too many details of the new statewide business tax are not yet available.