Commentary: A simple choice on property tax relief
As the 2007 legislative session heads into the homestretch, the budget debate is boiling down to a simple choice: Are we going to provide significant and permanent property tax relief for Minnesota seniors citizens, families, farmers and small bu...
As the 2007 legislative session heads into the homestretch, the budget debate is boiling down to a simple choice: Are we going to provide significant and permanent property tax relief for Minnesota seniors citizens, families, farmers and small businesses?
Right now, the governor and his allies are arguing that we can put together a budget that adequately funds our schools, health care and transportation without raising taxes. What they aren't telling you is that under the governor's own budget proposal, taxes are increasing.
If his budget passes, property taxes across the state are projected to increase by close to $500 million or 7.3 percent in 2008. That would bring the total property tax increase in Minnesota since 2003 to $2.2 billion. That's a $2,000 tax hike for the average family of four.
Last week, the members of the House DFL Property Tax Relief Committee unveiled our plan to provide significant and permanent tax relief to Minnesota homeowners, as well as increase the fairness of our tax system. This legislation is an important step forward in returning balance to the state property tax system, which has spun out of control in recent years.
This proposal offers $543 million in property tax relief, and instead of the governor's projected 7.3 percent property tax increase next year, the average Minnesota homeowner will see a property tax cut of 3.4 percent! That's real relief.
The centerpiece of the proposal is the creation of a new Homestead Credit State Refund that provides reform by building more fairness into the system. Under the new Homestead Credit State Refund, if a person's property tax bill is more than 2 percent of their income, they will receive a credit to cut their taxes. The provision will provide $223 million in direct relief to Minnesota homeowners, with individual refunds of up to $2,500.
The bill also provides property tax relief through a $133 million cut in school property tax levies, and will increase Local Government Aid to cities by $60 million, county aid by $15 million and township aid by $3 million. Statewide relief is balanced between metro and rural areas of the state in the bill.
To pay for the property tax cut, the bill makes a small correction to our income tax system by creating a fourth tier, with every dollar of new money going directly into property tax relief. This plan will only affect couples who earn $400,000 or more, after deductions, and single earners who make $226,000, again after deductions.
According to the Minnesota Department of Revenue's most recent tax incidence report, the highest earners in our state are actually paying a smaller percentage of their income in taxes than the middle class. Specifically, by 2009 the richest 1 percent of Minnesotans, those making more than $1 million a year, will pay 8.9 percent of their income in state and local taxes. By contrast, those who make between $34,000 and $52,000 will pay 12.5 percent in total state and local taxes. This bill will help correct this inequity and bring more fairness to Minnesota's income tax system.
As the budget debate progresses, the question really becomes how do we pay for the services Minnesotans value the most? Over the past five years, we've asked seniors, young families, farmers and small businesses to pay a bigger and bigger share of state government through local property taxes. That's not fair.
We need a progressive tax system that does not place an undue burden on seniors on fixed incomes, young families just starting out, farmers or small businesses. I believe when Minnesotans consider the options, they will agree this plan creates more tax fairness, while at the same time standing up for our seniors, families, farmers and small businesses.
Paul Marquart, DFL-Dilworth, is a member of the Minnesota House and chairman of the House Property Tax Relief and Local Sales Tax Division.