Lessons to learn about property taxes

Published 1:13 pm Saturday, August 11, 2012

Guest column: By Phil Krinkie

As the Minnesota State Fair opens and cooler nights return, Minnesotans know it’s election season. And as sure as the school bus wheels turn, there will be another round of the “property tax flap” this fall.

State legislative candidates will square off at doors and debates across the state with competing chants of “did so” and “did not.” There will be radio and cable television spots as well as mail boxes full of accusations about who raised property taxes and who didn’t, accompanied by facts and figures trying to explain why this happened and by how much. The issue of property taxes in Minnesota is as much of an election tradition as lawn signs and fundraisers.

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My caution to homeowners is to be prepared for the inevitable 2012 edition of the “property tax flap” coming to their neighborhood this fall. It will start with one of the legislative candidates pointing a finger at their opponent saying that they raised property taxes. Next, one of the candidates, if not both of them, will start to explain what and how they will try to reform and fix the property tax mess if elected.

If voters want to save themselves a lot of time and frustration over this year’s version of the “property tax flap,” my advice is to forget about it!

First and foremost Minnesota’s property tax system is confounding and confusing. Many elected officials, particularly those from local units of government, like it that way because it obscures who is responsible for paying for local government services. So, before blaming any of your state elected officials, know this:

Your property taxes are most likely to go up in 2013, even if your home value is going down. The simple reason is because it will cost more to operate city government, county government and school districts next year. Even if one of these entities is able to hold the line on their spending, the odds are the other two, three or four taxing jurisdictions will spend more. Spending increases, when combined for each of these units of local governments, means more in taxes for you — the homeowner.

According to the latest House Research Simulation Report on Property Taxes, there is at least some good news coming for homeowners with regard to their property taxes.

Property taxes shouldn’t be on the rise for homeowners in 2013. The report projects that property taxes will increase by $153 million, or 1.8 percent next year. Of the $153 million, $56 million is estimated to come from new construction, leaving only $97 million of the increase on existing properties.

For residential homeowners, the news is even better as homesteaded property is projected to see a slight decline. The largest increases are likely to be borne by agricultural property; this is due to the rise in land values.

But these are only estimates and many things can change between now and next December when cities, counties and schools set their 2013 property tax levies. So, as you listen to the “property tax flap” this fall from legislative candidates, there are two things to remember.

First, your state legislator’s vote has little impact on the amount you pay in local property taxes. Certainly, state aid and K-12 appropriations will make a difference in some communities, but statewide there is less impact than most people believe. Currently state aids and credits amount to less than 10 percent of the total property tax levy.

Second, and most important in determining the amount you pay in property taxes is your selection for local government offices; such as county commissioner, city council and school board. Today the total property tax levy brings in more revenue than the state individual income tax. In 2013 property tax collections are estimated to top $8.5 billion. As local government officials continue to increase spending there will be commensurate increases in property taxes even in the face of shrinking home values. Only more scrutiny on city and county budgets will impede the growth in local spending and in turn help reduce property taxes.

Lastly, beware of any candidate who promises transparency, let alone simplicity in the property tax process. It is my observation after 30 years of studying and seeking solutions to simplifying property taxes, that it is nearly impossible. Too many local officials and interested parties like the current system of complexity and obliqueness. So when you hear this year’s version of the “property tax flap” from state legislative candidates, my suggestion is to tune it out, ask them other questions of interest to you, and focus your concern about property taxes on your candidates for local government office and their spending decisions.

Phil Krinkie, a former eight-term Republican state rep from LinoLakes who chaired the House Tax Committee for a while, is president of the Taxpayers League of Minnesota.