COMMENT by Juris
Under the Minnesota homestead property tax law, our unrealized capital gains and debt are taxed with the apparent assumption that we have capital gains from elsewhere to pay this tax. Such a concept is so blatantly unjust that it is no wonder taxpayers are perpetually complaining about it.
However, there is hope for a just solution to our property tax problem. The Minnesota Department of Revenue (DOR) has issued a document showing that our property tax burden based on our incomes can produce the same tax revenue as that based on the market value of our homes. The document is called the "Voss Report", and it covers all of Minnesota's twenty taxing districts.
The latest summary from the DOR's twenty taxing districts shows that the lowest fair-share burden is in the Arrowhead District at 1.84-percent and the highest in Minneapolis at 3.36-percent, with the other districts ranking somewhere between these two.
From the DOR data, one can see that if our homestead property tax was adjusted based on our incomes, it would produce a relatively low tax burden for all homeowners in each of the taxing districts. In fact, it would be a much lower burden than either our state income tax or our sales tax.
It would be easy to implement a fair homestead property tax adjustment based on our incomes because the mechanism already exists to do so. All one has to do is adopt our existing Property Tax Relief Program's "circuit breaker" to include all homeowners. This program already uses our incomes as the basis for adjustment to distribute property tax refunds for individual taxpayers.
Our legislators should be cognizant of the fact that a homestead property tax adjustment at the state level, based on our incomes, will neither change how our property taxes are collected at local government levels nor compromise tax revenues. The existing "circuit breaker" is proof of that. It will, however, benefit the state budget if the state no longer has to fund the homestead property tax relief program for individual taxpayers. And, most of all, it will benefit the taxpayers by correcting the concept of taxing our debt and unrealized capital gains.
It is evident that we can have a permanent and just solution to our homestead property tax problems without a major change to our existing law. The solution is equitable to the taxpayers and to the government alike. Plus, it is simple to implement.
But ….how long will we have to wait for its implementation? And how many more years will the majority of homeowners still have to pay 5-, 10-, 20-, 30-percent, or more, of their incomes in property taxes, when the fair-share percentage is between 1.84 and 3.36?
Latest DOR’s “VOSS” report summary
TAXING FAIR SHARE
DISTRICTS BURDEN of
INCOME
_____________________________________
Arrowhead 1.84%
Central 2.60%
East Central 2.85%
Minnesota Valley 1.98%
North Central 2.08%
Northwest 1.81%
South Central 2.08%
Southeast 2.31%
Southwest 1.84%
West Central 1.99%
Anoka 2.79%
Carver/Scott 2.80%
Dakota 2.59%
Minneapolis 3.36%
North Hennepin 3.18%
Saint Paul 3.00%
Southeast Hennepin 2.43%
Southwest Hennepin 2.30%
Suburban Ramsey 2.68%
Washington 2.49%
COMMENT by Janis
* The property tax law taxes our homestead property as an unrealized capital gains tax. Even though we have not realized any income from the property, it is still taxed as though we have.
* Some taxpayers pay 10, 20, 30 percent or more or their income for property tax.
* The Voss Report shows that the Fair Share Burden of property taxes to income in the twenty taxing districts in Minnesota is from a low of 1.84 to a high of 3.36 percent
* A Fair Share property tax system would have all homestead property owners pay the Fair Share burden as determined in their taxing district. For example: Anoka=2.79%; Dakota=2.59%; Minneapolis=3.36%.
* By implementing a Fair Share burden in each taxing district everyone would be paying the same Fair Share of property tax based on their income. This tax would be less than taxpayers pay for sales tax or state income tax.
* Implementation would be easy because a mechanism already exists through the Property Tax Relief Program’s “circuit breaker”.
* Property taxes would be collected the same way they are now. The circuit breaker would adjust the property tax to the Fair Share Burden in each taxing district. Those paying more than their fair share would get a rebate and those paying less would have to pay up to their fair share.
* The taxes collected under this Fair Share system would be exactly the same as they are under the present system.
* The state would save the billion dollars they pay now in property tax refunds. This would no longer be necessary.
* In summary: All taxpayers would pay the same fair share.
The state saves about a billion dollars.
The tax revenues would be the same as they are now.
Implementation is done using an existing system.
Taxpayers no longer taxed on unrealized capital gains.
