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Will Trickle Down Economics Lower Minnesota Property Taxes?

by Bob Tivnan, Chicago, September 2013


For the first time in a decade, Minnesota property taxes are expected to decrease in 2014. That's what Governor Mark Dayton announced recently. The Revenue Department says property tax revenue will drop $121 million (1.5%) next year.


However, there are concerns that the forecast is overly optimistic about whether new measures put in place will actually lower tax bills, especially for business property owners.


More Money for Local Governments


Minnesota's Fiscal Year 2014-15 budget includes increased state aid for local governments. Without it, Revenue Commissioner Myron Frans said property tax revenue would have risen by an estimated $181 million.


The prediction is based on an assumption that local leaders will spend half of the state aid on property tax relief targeted primarily at homeowners and renters.


Senate Minority Leader David Hann doubts that will happen. "I don't think there's any evidence to show that increasing local government aid has the effect that they're claiming, that it somehow translates into a reduction of local taxes. It just doesn't work that way”, Hann said.


Is More Enough?


After struggling with reduced state aid for years, many communities could opt to spend the extra funds they get from the state on essential services like police and fire protection. Cities and towns that can't make their budgets work, even with more state aid, could choose to raise taxes -- but there are new obstacles associated with that.


The Legislature imposed limits on new taxes through local levies. Local leaders won't be notified about the precise caps they're dealing with until later in September.


It's clear that individual property owners don't have the power to restrain taxing bodies from spending more. What they can do, however, is take steps to control their real estate tax expense by scheduling a professional, independent assessment review of their property each year to determine if an appeal has merit.