Minnesota property taxes down, with help of state aid, credits

Minnesota property taxes will go down about $49 million for residents who qualify for state aid and credits this year, according to a new report.

The report by a nonpartisan legislative office shows that property taxes would have risen $124 million without the aid and credits, but new property tax and renters' credits will more than offset the increases.

The report has set off a new round of high-stakes political fighting in St. Paul. DFL legislators have pledged to lower property taxes through more state aid to local governments and through direct property tax relief in the form of aid and credits.

In a letter to constituents, House Speaker Paul Thissen, DFL-Minneapolis, credited Democrats' work for lowering property taxes for the first time in 12 years.

Homeowners will get some of the largest reductions in property taxes, about $171 million, or about 5.2 percent lower than last year. But owners of agricultural property, public utility land and commercial property could see their property levy edge up.

Republicans say taxes are going up for everyone, despite DFLers' sending millions to local governments in an effort to drive down property taxes.

"We knew farmers and rural landowners were going to be hit hard with property tax increases, but now it appears that homeowners in all tax brackets can expect to pay more despite promises the Democrats made over the past two years," said state Rep. Paul Torkelson, R-Hanska, who sits on the House Property and Local Tax Division Committee.

"The Democrats raised taxes on Minnesotans by more than $2 billion, and vowed this would actually help property taxes go down," said state Rep. Greg Davids, R-Preston, ranking Republican on the House Taxes Committee. "This report proves they didn't keep their word, and now Minnesotans are going to pay an even steeper price."

All that may seem contradictory, but both sides have a point to make. As DFLers note, if property owners or renters apply for their credits, they could pay a lower rate. But if they fail to do so, then they could, as Republicans say, pay a higher rate.

The lead author of the report cautioned that the figures for the aid and credits are estimates based on their best guesses as to how many Minnesotans apply for the tax relief.

The year-to-year comparison for actual taxes paid between 2013 and 2014, the numbers Republicans are highlighting, are the only numbers that analysts know for sure, said Steve Hinze, a legislative analyst in the research department of the Minnesota House of Representatives.

Calculating aid and credits, as DFLers are counting on, gets murkier, he said.

DFLers say the only number that matters is what Minnesotans actually pay, which will be lower once they apply for and receive their aid and credits.

Many Democrats are especially happy that the some of the steepest tax reductions for homeowners and renters are in rural areas.

Rep. John Persell, DFL-Bemidji, wrote a letter reminding constituents that property taxes were soaring as former GOP Gov. Tim Pawlenty cut millions from local governments.

Now, he said, legislators and DFL Gov. Mark Dayton "moved Minnesota in a different direction" and are lowering property taxes for the first time in years.