The State Legislature is well, well underway with their 2007 session. With the DFL controlling both the House and the Senate, there are some new issues getting some hearing over in St. Paul this year. An issue that always gets play each year is the attempt to make our system of taxation more fair. In years when the Republicans controlled the House and/or the Senate, they also wanted to increase the level of tax fairness, but it looked differently to them. Here’s an editorial from today’s Star Tribune newspaper that describes the DFL’s view of tax fairness:
Editorial: Aim for a fairer state-local tax system
Don’t raise one regressive tax to cut another.
Published: March 19, 2007
http://www.startribune.com/561/story/1060611.html
When it comes to hyping a forecast, Minnesota House DFLers can play in the same league as TV and radio meteorologists. Last week, they announced the best-guess projections of 2008 property tax increases with a “sky is falling” tone befitting the onset of a blizzard.
In fact, the property tax outlook for the state’s homeowners is improving from stormy to partly cloudy. After several years when state aid cuts to local governments, a 2001 property tax restructuring and rising home market values made homestead tax bills climb at a double-digit clip in much of the state, their rate of increase is slowing.
That’s happening for two reasons: Home prices are flattening — or worse — in much of the state. And the reverse is true for commercial and industrial property values. The real estate market appears to be doing some rebalancing of the state’s property tax portfolio on its own, without legislative intervention.
That won’t stop a DFL-controlled Legislature that rode into office on promises of homeowner property tax relief. On Friday, Senate DFLers pushed a $375 million property tax relief package over its first committee hurdle. It offers lower property taxes next year to virtually every homeowner in the state, regardless of income or market value — though, appropriately, it’s more generous to lower-income homeowners. Those are the taxpayers who were most ill-served as the total tax burden shifted from business to homes in the wake of the 2001 tax overhaul. They deserve a break.
Relief for other homeowners is less well-justified. The best case for it is that Minnesota is relying too heavily on the regressive property tax for its total state and local government revenue. But the Senate plan undercuts that argument by proposing to pay for homeowner relief in large part with a big increase in the statewide business property tax — $222 million through June 2009.
That approach raises one tax that falls disproportionately on low- and middle-income Minnesotans in order to cut another. Business taxes are passed onto consumers and employees, in often invisible but real — and regressive — ways.
A better way to finance property tax relief was proposed by House DFLers Friday: Use the income tax. The House would raise income taxes on Minnesotans with after-deduction income of more than $226,000 per year for individuals and $400,000 per year for couples. Those earners now pay a smaller proportion of their incomes in state and local taxes than do people with incomes under $100,000. Raising their taxes to reduce the property tax load would move state tax policy in the right direction — that is, toward a fairer system.
