This week the non-partisan House Research Department issued a stunning report that forecasted huge property tax increases in 2008. Statewide, the increase will total over $600 million, making it the largest property tax increase in Minnesota history.
The increases look even worse in Greater Minnesota. In Rice County, homeowners could see their property taxes rise by as much as 12 percent, while property owners in Scott County can expect an 8.5% increase. These numbers compare to a statewide average increase for homeowners of 6.5 percent.
Of course, this isn't a new phenomenon for Minnesota property owners. They've been dealing with huge property tax hikes for the last several years. In fact, property taxes have increased a whopping $1.7 billion since 2002. Keep that in mind the next time someone tells you that we've been balancing the budget without tax increases over the last 5 years.
The truth is that even though local governments levy property taxes, its budget decisions made at the state level that are driving these massive increases.
Minnesotans decided long ago that they didn't want to use property taxes to be the primary source of revenue for government programs like education, public safety and transportation. Property taxes, they knew, are especially hard on seniors, young families, farmers and small businesses. More significantly, using property taxes as the primary funding source for these programs creates a quality gap between the property rich areas in the suburbs and the property poor areas out state.
To address these issues, we shifted funding to the state level and started using a statewide income tax. It may seem rather boring, but at the time it was revolutionary. It was even called the Minnesota Miracle.
For decades, Minnesota has operated under this model. Local governments kept property taxes increases low because the state provided a stable source of funding for education, public safety and transportation. But in recent years, the state has not kept its part of the bargain.
In the late 1990's the state enjoyed record budget surpluses, and we cut income taxes. But when the economy soured and the state went into deficit, lawmakers decided to balance the budget without raising taxes.
As a result, the state did not increase education funding at a rate that kept up with cost increases. They even cut education funding for the first time in Minnesota history. That decision led to dozens of property tax raising school levies all across the state. The state also cut Local Government Aid (LGA), a program that helps local governments pay for police, fire and other services. Starved of state funding, local governments turned to property taxes to pay for these essential services.
During the campaign, I promised that property tax relief would be one of my top priorities if I were elected. The news that record property tax increases are on the horizon has only hardened my resolve. In order to secure significant, permanent and fair property tax relief, we need to return to the system that worked so well in the past. We need to restore state funding to education, local government aide and transportation. Sound investments will make sure w all have a place at the table.