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Minnesota Legislature Seeks to Reduce Reliance on Property Taxes

by Bob Tivnan, Chicago, January 2013


Minnesota property taxes are forecast to increase by $187 million this year as cities, counties and schools raise their rates to make up for losses in state aid. The heavy reliance on property taxes is an issue that the Legislature plans to address.


System is Unbalanced


Revenue Commissioner Myron Frans met with thousands of citizens at local town hall meetings last year to discuss the property tax shift that's occurred and get input on how it should be fixed.


To illustrate the problem, he carried two three-legged stools representing the three main sources of state revenue - income taxes, sales taxes and property taxes.


One stool was balanced, with each leg representing one-third of the total tax revenue. The other stool representing the actual system as it was in 2010, was unbalanced. Property taxes served as the longest leg, which demonstrated 40 percent of the total revenue. Income tax represented 33 percent and sales tax represented 27 percent of the total.


The system as it stands is “out of date, out of balance and not as fair as it should be,” Frans said. Frans is working with Governor Mark Dayton on a tax reform proposal that will be released on Jan. 22 as part of the governor's budget plan.


Rates Rise


The Minnesota Department of Revenue Property expects property taxes will increase an average 2.3% statewide this year.


Here's the breakdown:


  • Cities - 3.1% ($57.8 million)

  • Special Taxing Districts - 2.9% ($9.1 million)

  • Statewide Business Property Tax - 2.8% ($23.3 million)

  • Schools - 2.1% ($47.7)

  • Townships - 1.9% ($4.3 million)

  • Counties - 1.7% ($44.8 million)


The increases are based on maximum levy amounts proposed by local governments in advance of annual Truth-in-Taxation meetings, which began in late November.


Final levies will be determined following these meetings, which are required for cities with populations over 500, counties, school districts, regional library authorities, and metropolitan taxing districts.


This situation of rising tax levies clearly demonstrates why a fair and equitable level of assessment on your property is now more critical than ever. It's the best way to help control future property tax expenses under these troubling financial times for state and local governments.