Governor's property tax proposal

The governor’s tax bill didn’t exactly get a rave review in the House Property Tax Relief and Local Sales Tax Division on March 14, but it sparked discussion as the division begins to craft its omnibus bill.

“I do appreciate that the governor did not take another hit at local government aid or county program aid,” said Rep. Paul Marquart (DFL-Dilworth), the division chairman. “I do think an effective case has been made by our mayors and city council members and commissioners that local government aid and county program aid does provide property tax relief.”

Gov. Tim Pawlenty’s bill covers three areas related to property taxes: a change to city levy limits; a reduction of the renters’ tax credit; and transitional aid for cities affected by a utility tax rule change.

Revenue Commissioner Ward Einess said a change to levy limits would likely distribute millions of dollars in property tax relief. However, Marquart questioned whether the change would cause some cities to lose parts of their budget, forcing them to cut services.

Currently, an eligible renter gets back 19 percent of rent paid over a one-year period. Under the governor’s proposal, it would be cut to 16 percent, or an average of about $119 per renter.

Einess said the lowered percentage better reflects the current amount of property tax paid by landlords, but Rep. Diane Loeffler (DFL-Mpls) questioned whether it would be too much of a decrease for low-income renters.

The governor offered his solution for the controversial utility provision rule change, which lowered the amount of property taxes collected by local governments. The governor’s proposal would offer state aid to communities that lost at least 5 percent of their tax base.

The proposal, which would last two years, did not impress every division member. Marquart said he’d like to see a solution that benefits everyone affected by the change, not just those hardest hit.

“This is going to put a squeeze on a lot of these communities,” he said.

The governor’s tax bill is HF3967, sponsored by Rep. Dean Simpson (R-Perham). Sen. Julianne Ortman (R-Chanhassen) sponsors the companion bill, SF3665, which awaits action by the Senate Taxes Committee.