MANKATO — Minnesotans will see a sizable drop in their property taxes because of increased Local Government Aid funding passed this year by the Legislature, according to a progressive think tank organization.
Minnesota 2020 presented data Wednesday in Mankato that took the collected information by the non-partisan Minnesota House Research Department and calculated in additional formulas to account for the state's homestead tax credits, renters tax credits and the increase in the state school funding formula.
Matt Entenza, senior fellow with Minnesota 2020, said their formula shows the average homestead property will see a 6.4 percent decrease in property taxes and that all property tax classes would see a 1.5 percent net average decrease in property taxes.
By comparison, the House Research data only showed homestead properties going down 2.5 percent in taxes and the statewide net average for all property classes going up 0.2 percent.
Entenza said south-central Minnesota, which covers St. Peter, North Mankato and Mankato, would exceed the state in property tax reductions. He said that even without the tax credits factored in, south-central Minnesota would see property taxes on existing homestead properties decrease by nearly 10 percent while the statewide average for this category would decrease by 3.1 percent.
Entenza directly tied Minnesota 2020's projections with the recently passed $80 million increase to Local Government Aid funding and the $500 million increase to the state school funding shift.
He said the results of their analysis disproved skeptical lawmakers such as Rep. Tony Cornish of Vernon Center, who thought it would not decrease property taxes. Entenza said the results of the analysis are important because property taxes are the most regressive form of taxation.
Cornish, a Republican, said he feels their assessment is a “shell game” that hides the facts about the funding sources.
“All of the funding inevitably has to come out somebody's pockets. You should only fund LGA as far as you have it in the budget. Taking money from (taxpayers) from somewhere else doesn't make it better,” Cornish said. “The reason people like LGA is because it allows them to avoid having to make the hard cuts.”
He said DFL-leaning organizations have tried to label the Republican property tax solution passed in the last biennium as “shifts and gimmicks,” but they ignore that their own solution runs on its own gimmicks.
Beth Kadoun, director of Tax and Fiscal Policy with the Minnesota Chamber of Commerce, said her organization is very skeptical about the numbers presented by Minnesota 2020.
She said the analysis is based off the useful House Research numbers, but those numbers are based on the best guesses by House Research. She said the data do not have concrete numbers from Minnesota cities yet and factor in presumptions that could change from city to city based on the local need. She gave the example of the House Research number calculating property tax reductions based on a flat 50 percent of the new LGA funding going directly to property tax reduction.
She also said the Minnesota Chamber is concerned that the LGA increase was funded by several tax increases that were passed this year. She said the new taxes hamper Minnesota's competitiveness with businesses. She said the Minnesota Chamber prefers direct property tax reliefs, such as the homestead credits.
For the 2014 Local Government Aid allocations, Mankato's funding increased by over $589,000, North Mankato's funding inceased by over $200,000 and St. Peter's funding increased by over $292,000.