the property tax: where it’s been—and where it might be ... property tax maca 3 21 12 as...
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The Property Tax:Where it’s been—and where it might be headed nextMatt SmithDakota County
MN Association of County AdministratorsMarch 21, 2012
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“We all were sea-swallow'd, though some cast again(And by that destiny) to perform an actWhereof what's past is prologue; what to come,In yours and my discharge.”
William ShakespeareThe Tempest, Act 2, Scene I,
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Every blip has a story
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Real growth rates have varied over time
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“A better tax system will be… …more understandable and predictable for taxpayers, so they know how much tax they’re paying & why, and what government is doing with those dollars.
…more fair, balancing citizens’ ability to pay and the cost and benefits of the government services they consume, and building confidence that the tax laws are being applied evenhandedly to all…
A fair tax system will eliminate unfunded mandates by assigning tax responsibility to the same level of government that defines what levels of service will be provided.”
Governor Jesse VenturaThe Big Plan: Service, not Systems , Dec 10, 2000
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2001 policy objectives—and actionsAccountable: Make the property tax smaller and more “local”
• State assume basic (Gen Ed) education costs• Complete state funding of court administration• Require cities/towns to rely more on property tax• Transit funding from MVST instead of property tax• New state levy on ‘non-voting’ (CI, cabin) properties
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2001 policy objectives—and actionsFair: Make the property tax more acceptable to all taxpayers
• Compress property classification rates to reduce tax disparities—especially for ‘local’ decisions
• New classification system introduced MVHC• Phase out limited market value• Target property tax relief based on ability to pay (circuit breaker)
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2001 policy objectives—and actionsCompetitive: Make the tax less costly for jobs and housing
• Reduce high effective tax rates on businesses and rental residential property
• Make future policy discussions about interstate business property tax competitiveness a state policy (and budget) issue, not a local one
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History of Major Taxes Percent ShareFY 1962 - 2008
0%
10%
20%
30%
40%
50%
60%
62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08
Income Tax Sales & MVET Net Property Other Taxes
53.6%
31.9%
14.5%
0.0%
2001 ReformFY02 FY03
Income 29.7% 29.9% Sales 24.8% 26.0% PTX 29.3% 25.6% Other 16.2% 18.5%
Source: Minnesota Department of Revenue and Price of Government, February 2008
Minnesota Miracle
42.3%
26.5%
19.9%
11.4%
28.7%
17.0%
32.1%
22.2%
Slide from presentation by Eric Willette, MN DOR, to Governor’s 21st Century Tax Reform Commission, August 1, 2008.
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Homeowner Effective Tax Rates and PTX % of IncomeCY 1997 - 2007
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
1.80%
CY 1997 CY 1998 CY 1999 CY 2000 CY 2001 CY 2002 CY 2003 CY 2004 CY 2005 CY 2006 CY 2007
Res Homestead ETR Prop Tax % of Personal Income
2001 ReformCY01 CY02
Res Hmstd ETR 1.40% 1.10%PTX % of Income 1.32% 1.12%
1.67%
1.43% 1.52%
1.05%
Source: Minnesota Department of Revenue and Price of Government, November 2007
Homestead market value grow th averaged 12.6% betw een 2003 and 2007
Slide from presentation by Eric Willette, MN DOR, to Governor’s 21st Century Tax Reform Commission, August 1, 2008.
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Property TaxMinnesota’s property tax rank is relatively low (either per capita or as a percent of income).
18
Chart 10Minnesota Property Taxes (State & Local)
Rank Among 50 states and DC, FY 1995-2006
3735 35
2426
24
2019
15
282728
15
181815
171514
0
10
20
30
40
50
1995 1996 1997 1998 1999 2000 2002 2004 2005 2006
Ran
k (o
f 51)
Percent of State Personal Income
Per Capita
Slide from presentation by Eric Willette, MN DOR, to Governor’s 21st Century Tax Reform Commission, August 1, 2008.
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Due to Minnesota’s class-rate system, though, tax rankings for some business property types are high relative to homestead property tax rankings.
Chart 11 Minnesota's Commercial and Industrial Property Tax Rankings
12
26
3 59 11
141411
7
242019
23
18
2630
25
0
10
20
30
40
50
1998 2000 2002 2004 2005 2006 2007
Ran
k (o
f 51)
Commercial($1,000 K)
Industrial ($1,000K), 50% personalproperty
Industrial ($1,000K), 60% personalproperty
Source: Minnesota Taxpayers Association, (50-State Property Tax Comparison Studies), Urban 19
Slide from presentation by Eric Willette, MN DOR, to Governor’s 21st Century Tax Reform Commission, August 1, 2008.
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Effective Tax Rates 1990-2008
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Commercial-Industrial Non-homestead residential Residential HomesteadAgricultural Total All Properties
Slide from presentation by Eric Willette, MN DOR, to Governor’s 21st Century Tax Reform Commission, August 1, 2008.
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Post-reform issues identified (almost immediately):• Can/will the state sustain commitment to fully fund K12 from
its general fund?• How will the state property tax be managed?• Will ‘local’ tax and spending decisions be allowed to be local?
(Levy limits forever?)• How can we better inform/engage taxpayers?
• Intergovernmental fiscal relations: • Adversarial? • Cooperative partnership?
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Who gets the property tax?
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The current slices
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Taxes went down dramatically—for a year
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School funding mix
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School revenue sources ebb and flow more than total
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State aid role is diminishing for cities and counties
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The state property tax will be hard to repeal
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From the Big Plan to now:• Increasing reliance on property tax in the overall state-local
revenue system• Appropriate role for the property tax is again murky• Increasing regressivity in the overall tax system • New concerns about business competitiveness and property
taxes
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If anyone is keeping score…
Derived from MN DOR data:http://taxes.state.mn.us/legal_policy/pages/research_reports_tax_rankings_historical_tables.aspx
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And not just here, apparently
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What Myron is probably hearing
Citizens’ Jury on Minnesota Property Tax Reform August 2-6, 1999, sponsored by the MN Department of Revenue, produced by the Jefferson Center.
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The Citizen Jury’s verdict:
Citizens’ Jury on Minnesota Property Tax Reform August 2-6, 1999, sponsored by the MN Department of Revenue, produced by the Jefferson Center.
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Property Tax Working GroupProgress to date
Kathleen Gaylord Dakota County CommissionerFeb. 1, 2012
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Property Tax Working GroupCharge:• Examine the property tax calendar
• Determine the efficiency of various components▫ Classifications▫ Credits, Aids▫ Exclusions, exemptions▫ Abatements
• Final report to the Legislature February, 2013
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Can we shorten the cycle?
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Does it need to be this complex?
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Where we are today
• Consensus for simplification/understandability▫ Reduce the number of Classifications
Consolidate agricultural land & buildings classificationsProvide the same benefits to ag and non-ag homesteadsEliminate classifications (i.e. partial interests, relative, cross county line, tiering.)
▫ Four basic classes
• Confine the property tax to local government▫ State funding for state mandates
▫ Eliminate the State General Tax
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Where we are today
• Improve Property Tax Informational Notices▫ Include the new MV Exclusion and show both
the EMV and the TMV
▫ Better timing/coordination of notices
▫ Provide basic budget information
▫ Add email and website addresses
▫ Provide web based detail on budgets and levies
• Modify the Truth-in-Taxation Process▫ Engage taxpayers electronically vs. published
notices & in-person meetings
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Policy questions for counties• Can we frame the statewide service vs. local property tax
tradeoff as well as K12 has?• Could statewide financing and local delivery long co-exist?
Should they?• How much direct connection to the state budget do we want,
and where?• How do we value the tradeoffs between the unpopularity of
the local property tax vs. its stability for financing locally popular services?
• Where do we want to ‘compete’ for resources: locally or in the state budget process?
• How to best support simpler, less-costly administration of the property tax?
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