Most Minnesota property owners’ Truth-in-Taxation statements are arriving in the mail. And this year they reflect some hard truths.

Topping that “truth” list is how any “tax credit” essentially creates winners, losers and confusion.

Gov. Mark Dayton and the Legislature hammered that truth home in July, when the deal they crafted to balance the state’s budget eliminated the state’s Homestead Market Value Credit and created the Homestead Market Value Exclusion.

The change is gaining headlines because those tax statements no longer show the credit. Instead, many show higher property taxes, which has sparked a political blame game.

Eliminating the homestead credit saved the state $260 million in 2012.

How and why? The state created the credit to give homeowners a tax break. However, the state still promised local governments that money, in part to meet state mandates. The state has long tried to provide it by tapping its other revenues. Mostly, though, the state came up short. The past two years combined, the state has reimbursed cities and counties only $89 million even though the homestead credit takes hundreds of millions dollars from their coffers.

Faced with a $5.2 billion budget gap, legislators and the governor replaced the credit with the exclusion.

The exclusion aims mostly to soften the loss of the homestead credit on homes valued at less than $414,000. (In other words, high-value homes and other properties will likely see the biggest increases.)

However, the details behind that exclusion are more complex, and, yes, confusing.

Local governments are justifiably saying the exclusion passes the buck to them for raising taxes or cutting services.

Here is why: Ultimately, the exclusion shrinks the taxable value of homestead property. For local governments, that means they not only lose reimbursement from the old homestead credit, but the tax base they use to generate funds now is smaller under the exclusion plan.

As for local tax rates, some state legislators refute that local tax hikes are their fault, noting local elected officials can cut services and live within the new means dictated under the exclusion formula.

Technically, they are correct. Realistically, though, this whole issue is yet more evidence the Legislature and governor lacked the courage to make the tough decisions.

— Nov. 12, St. Cloud Times