To the editor,
To get an idea of the effect on state cuts and freezes to the city’s local government aid (LGA), consider this: If the city were getting our full LGA before Gov. Tim Pawlenty cut it followed by subsequent years’ freezes to LGA, the city would be receiving $500,000 more than it currently receives each and every year from 2010 to 2012. A $500,000 loss in LGA represents about 20 points or 25 percent of your property tax bill from the city. A quarter of your city property tax bill in each year of 2010, 2011 and 2012 is the cost to you of the 2009 cut and subsequent freezes.
The city’s interest in the current tax reform debate at the state Capitol is that we are looking for additional state funding on the LGA formula so we can reduce the burden to local property owners as we did in December of 2008 when we cut our levy for 2009 by $300,000 from 2008. In 2010, we had to restore taxes to prior levels due to Pawlenty’s 2009 cuts followed by the freeze of LGA since then.
This should remind us all that for the most part “cutting taxes” really means shifting taxes. And the shift usually happens to the people with the least amount of voice in the halls of government. Small rural communities need strong representation and thankfully we have Sen. Tom Bakk and Rep. David Dill to fight for us and fully funding LGA.
However, we need to be thankful and also wise in supporting our representatives in our fight. We need to support the proposal to extend sales tax to more goods and services while reducing the rate. We need to support efforts to restore stability to state funding if we are ever going to reduce reliance on property taxes.
Commissioner of Revenue Myron Frans has reported that the tax sources of state and local funding are currently weighted as follows:
Property tax — 40 percent
Income tax — 33 percent
Sales tax — 27 percent
Mr. Frans has described these proportions as a three-legged stool that won’t stand upright because the leg for property tax is too long and the leg for sales tax is too short. To bring this “three-legged stool” into balance so the “stool is on a sturdy footing” (read state and local tax structure is more stable), we need to increase the percentage of funding provided by sales and excise taxes — bringing the 27 percent leg to 33 percent and dropping property taxes.
With increased funding for local government aid, the reliance on property tax, currently the longest leg of the stool, would be reduced and we would have more stability and equity in funding local government.
Unless we are willing to support reasonable proposals that provide a better structure (read sturdier stool) for state revenues, we will be paying even more for property taxes and the leg for property taxes will get even longer than 40 percent.
Cynthia Jaksa
Finance and Legislation Chair
International Falls, MN
