No more tax aids and credits

What would happen if all state aids and tax credits were abolished and all the shackles that bind local governments to state mandates and levy limits were eliminated? Rep. Ann Lenczewski (DFL-Bloomington) presented the scenario to the House Property and Local Tax Division March 2 in the form of HF398.

The bill would get to “zero-based budgeting for property taxes,” she said, by doing away with all state aids, credits and mandates to local governments. Laid over for possible inclusion in an omnibus bill, it has no Senate companion.

Lenczewski said this is her attempt to get beyond rhetoric and have members think about the role aids and credits play in helping to equalize property taxes and services across the state.

“What I’m attempting to do is throw out the system, and use data to help people think, ‘If you are going to redo the system how would you do it,’” she said.

If enacted, everything from local government aid to credits related to market value, disaster and taconite would go away. However, the property tax refund would be enhanced and the renter’s credit assured. This would move from the state tax system to purely local decision-making, she said.

Scenarios created by the nonpartisan House Research Department and the Department of Revenue show that this all comes at a cost.

While the state may save approximately

$1 billion a year, the average property taxpayer in Greater Minnesota would see a more than 20 percent increase in their property taxes, while most in the Twin Cities metropolitan area would see at least a 10 percent increase. Towns on the Iron Range would experience a 107 percent hike in property taxes. A few cities, like Bloomington, would see a decrease.

Lenczewski encouraged members to have the conversation about how the system works as a unit and its impact across the state.

“The system works to equalize disparity. … Sometimes the committee does better work if the rhetoric is toned down and recognizes these things have a purpose,” she said. Only then can we frame the discussion around what to do with the $5 billion deficit, she added.