Funding for Minnesota agencies is four weeks away from drying up and a key element of the legislative deadlock appears to be the Legislature's attempt at property tax reform.
Differing views were offered on that issue Wednesday by Senate President Don Samuelson and Don Salomone, director of the nonpartisan Minnesota Taxpayer Association, in phone interviews with The Dispatch.
Samuelson, a Brainerd DFLer, is convinced that in the next three or four years low- and moderate-value homeowners will pay a price for the property tax shift favored by the House and Gov. Jesse Ventura. The senator said that every county auditor and assessor he talks to agrees that as taxes increase for local services -- and common sense indicates local services will grow -- the taxes on lower and average value properties will grow at a faster rate.
This is brought about by the reductions to commercial and industrial property taxes, he said, and those to seasonal/recreational homes that are valued up to $500,000. In Crow Wing County, Samuelson said 56 percent of the seasonal/recreational properties are owned by residents of the metropolitan area and 22 percent are owned by non-Minnesotans. That break, he said will be at the expense of local homeowners and owners of low-value property.
Salomone points out there will be double-digit reductions to all classes of property in the first year and said fears that taxes on lower-valued homes will rise in the future are speculation. He acknowledged that under the House plan property owners will pay a greater share of any levy raised by a city or county but that is part of a multi-year effort to bring the homeowner's share of the tax burden more in line with their share of the real estate values.
"Residential property accounts for 56 percent of the value and pays 44 percent of the property tax," Salomone said. The House tax reform would bring Minnesota closer to the national average relationship between business and home taxes.
"Certainly the (tax) shift will be in proportion to the extent they demand or support local spending," Salomone said.
And the local unit of government is where spending decisions should be made, Salomone contended.
"We shouldn't start out with a preconceived idea of what people need or want," Salomone said.
At one time the ratio between Minnesota business and homeowners' share of tax burden was 5 to 1, the MTA director said. The House bill would bring it down to about 2 to 1. The removal of education funding from the local property taxes should counter any possible tax increase because of the tax shift.
"I see it as sort of a culmination of a multi-year adjustment process," he said. "If we suck it up and take the medicine maybe taxes will be lower in the future."
Samuelson opposed the May 25 agreement which Senate Majority Leader Roger Moe agreed to, because he thought it would hurt rural Minnesota. He said 75 percent of Crosslake properties are seasonal/recreational and when those taxes are reduced the homesteaders will have to pick up the difference. Similar situations exist in Breezy Point and Lake Shore, Samuelson said.
"This is not good for our area," Samuelson said. He took exception to recent comments from some former state senators who claimed that rural Minnesota hasn't been paying enough taxes.
"I resent that quite frankly," he said.
And how will the impasse be broken?
"That's the question of the day," Salomone said. "It's going to take some movement to break this logjam."
Salomone said it's clear there was some unexpected unraveling of the May 25 deal between House and Senate leaders.
"We had every reason to think a real deal was done," he said.
Even though the June 30 deadline looms over the Legislature, Samuelson said that a little bit of a cooling-off period might help lawmakers digest some major tax and education funding changes. He said the governor had seven months to analyze these changes while legislators didn't see the package until February.
While general parameters were agreed to in the May 25 agreement, Samuelson said agreement was not reached on how to protect low- and moderate-value homes.
"I think eventually the leadership will get together," Samuelson said. "I think we may be at a point where the conference committee just isn't going to agree."
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