The headline in today's Faribault Daily News is typical of those Bluestem is reading in newspapers across the state: Local tax bills could spike with homestead credit change.
Those tax bills are property taxes.
FDN's Jaci Smith reports:
. . .a measure that moved quietly through the capital’s various committees and wound up in the final budget enacted in St. Paul has the capability of negatively impacting the tax bill of every property owner in the state.
Last week, Keith Carlson, executive director of the Minnesota Inter-County Association, spoke to the Rice County Board of Commissioners about the elimination in 2012 of the state’s homestead credit.
Under the credit, the state paid part of the taxes for any property labeled a homestead and whose market value was under $450,000. But this year the state replaced the credit with the Homestead Market Value Exclusion. Here’s how it works: On a sliding scale that starts at 40 percent for properties worth $76,000 or less and covers homestead-designated properties up to $414,000, the exclusion shaves a portion of the property’s value before figuring the tax.
But here’s the kicker: There is no reimbursement for that exclusion from the state. So, with that much less property to tax, local governments will likely have no choice but to raise tax rates just to have the same amount of money as last year. Or, they can make drastic cuts to their budgets.
So whose idea was this, anyway? Good question, and Minnesota House Tax Czar Greg Davids is working very, very hard to be Mr. Accountability on this one, as a public spat with Governor Dayton demonstrates.
Not that Davids doesn't think raising your property taxes is a bad idea.
On Wednesday, West Central Tribune staff writer Carolyn Lange reported in Key lawmaker says tax credit elimination is right decision:
The elimination of the homestead tax credit on property taxes will mean tax increases for most property owners but should be a more stable funding mechanism for counties and cities.
“It was the right thing to do,” said Greg Davids, chairman of the House Tax Committee, during a presentation Tuesday in Willmar to local elected officials, who’ve been struggling to understand the local consequences of changes made in the state tax bill.
The bill that was approved during a special session in July includes the elimination of the market value homestead credit, which gave a tax break to homestead property owners by lowering their gross taxes.
Lange reports that local officials in Kandiyohi County estimate that, because of the change, property taxes will go up six percent--even without a change in the county’s levy rate.
And whose idea was this? Davids decided to credit Governor Dayton and local officials, while recommending budget cuts:
Davids said the elimination of the program was proposed by Gov. Mark Dayton, and had been requested by county and city leaders who were frustrated with the process of adjusting budgets because the state failed to provide promised tax credit reimbursements.
He said local governments should consider cutting budgets and using reserve funds to off-set the tax increase.
Local city and county representatives said they’ve been doing for years.
Funny, but the county and local officials in the Lange article don't sound like they were breaking down Davids' door to have him make the change.
Governor Dayton is having none of the Tax Czar's fables. Yesterday, Lange reported in Gov. Dayton disputes Republican’s claims on homestead credit:
When Rep. Greg Davids was in Willmar Tuesday night to explain the new tax bill to local government officials, he said the elimination of the market value homestead credit was proposed by Gov. Mark Dayton during special session negotiations in July.
Davids, a Republican from Preston, is chairman of the House Tax Committee, and reiterated that statement in a telephone interview Thursday morning.
Davids said eliminating the homestead credit was in the governor’s “first offer” during the negotiation process and that there was “quite a bit of debate” about the proposal.
“It kind of caught me off guard,” Davids said Thursday, of Dayton’s offer to end a tax credit that reduces property taxes on homesteads.
It apparently caught the governor off guard too.
Katharine Tinucci, Dayton’s press secretary, called the Tribune to say that Dayton did not propose eliminating the homestead credits and that the proposal came from Republican lawmakers. She said the governor reluctantly agreed to proposal the as part of a compromise to end the state shutdown.
In a letter Dayton wrote to Davids, the governor said the claims that he proposed ending homestead credits is “completely and absolutely untrue.”
Dayton said eliminating homestead credits was included in the GOP’s first budget that he vetoed and that it was “proposed and pushed” by Republican leaders during the final negotiations. . . .
Read the whole thing at the Tribune. There's more in the Star Tribune, including a copy of the letter Dayton sent to Davids. Talking to the Strib, Davids got a bit peckish toward the governor:
Republicans first proposed the idea, Davids said, but Dayton included the provision in his first offer during final budget negotiations.
“So we are both right,” said Davids, from Preston.
Davids said the governor needs to take responsibility to the budget he signed.
“I find it interesting that he signed it into law, but he doesn’t take responsibility because he doesn’t like it,” Davids said. “There are things in there I don’t like, but I voted for it.”
Davids, who has been in the Legislature for 20 years, said the first-term governor is still learning how things work around the Capitol.
“He’s new here,” Davids said. “He will get over it.”
Rly? Perhaps Davids will raise this same line of reasoning the next time a Republican blogger bloviates about how Dayton--who served as state auditor and U.S. Senator--has only held public sector jobs.
But Bluestem isn't holding our breath. Obviously Davids--who started out the week by talking about a what a wonderful idea this is--wants things both ways. Perhaps it's because he's new around there--in his first second term back after being turned out of office in 2008 2006 (h/tip to Jacob G. for the correction) .
Photo: Finger-pointing Tax Czar Greg Davids carrying on in Kandiyohi County, via the West Central Tribune.