Property tax increases will stun homeowners

In a few days homeowners will get their property tax statements, formerly known as Truth in Taxation statements.

There are likely to be some big surprises.

The state budget deal agreed to last year by the Republican Legislature and Gov. Mark Dayton removed what is called the Market Value Credit.

Basically, it was a formula for reducing the property tax people and business paid. The local governments reduced your tax bill and were reimbursed for that by the state with a payment directly to the local government.


But it was usually only partially funded. So, the governments ended up giving a state mandated property tax break, but were rarely reimbursed for the full amount.

But eliminating the credit helped reduce last year's $1.5 to $2 billion deficit by about $261 million. And that is about how much property taxes will go up in aggregate this year, according to estimates by the Minnesota Inter-County Association.

The Legislature did try to mitigate this hit by providing what's called an "exclusion" to certain property. Basically they changed the state law on how local government's must calculate the value of your property and the tax.

Whereas, for example, a property that used to be valued at $76,000, will be valued at $46,000, thereby reducing the tax owed on that property.

But what people are likely to see on their tax bill is lower home value and higher taxes. The higher taxes come from local government having to set higher levies to make up for the loss of market value money. That will be a real shock.

As I've said before, the property tax is one tax where Minnesota is far below other states, so it's the one tax we could raise and still be "competitive."

But this is not likely to go over well. Tax increases will be 5, 10, 15 percent and most of the small towns and suburban areas will be hit hardest, locales that generally vote Republican.

It's going to be an interesting election.