It should come as no surprise that actions taken in St. Paul to end Minnesota’s government shutdown would have an impact on state residents.
But what is a surprise is that the Legislature, with Gov. Mark Dayton’s approval, eliminated the market value homestead credit aid, which provided money to local taxing authorities to reduce property taxes. The credit program was replaced with an exclusion program that will lead to a direct increase in people’s property taxes.
The exclusion trims the first 40 percent of a homestead’s value for figuring taxes, giving property owners some relief, but no money to local taxing authorities. Local governments will likely have to raise tax rates to get the same amount of money they had last year. The impact will likely mean higher taxes for all types of property statewide, according to state officials.
The new program means that taxing authorities must reduce levies or certify their gross tax levies as planned to fund their budgets with property owners picking up the costs because the state eliminated the homestead credit.
The change couldn’t come at a worse time as counties, cities and schools are figuring their budgets and levies for 2012. Proposed tax levies must be certified to the auditor by Sept. 15. Proposed levies may be reduced, but not increased in the final adoption in December.
It appears the change will be felt more strongly in counties with lower property values and lower-valued homes because the old program gave the highest credit to homes valued at $76,000 or less and was phased out as home values increased.
Some officials have said the change is a clear example of the state’s actions directly raising people’s property taxes. But counties, cities and other taxing jurisdictions will look like the bad guys if taxes are increased to fill the gap.
The government shutdown needed to end, but more thought should have been given to the real impact of this change.
