Minnesota property taxes to go down, with help of aids and credits

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

The report by a nonpartisan legislative office shows that property taxes would go up $124 million without aids 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. Legislative Democrats have pledged to lower property taxes through more state aid to local governments and through direct property tax relief in the form of aids 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 in 2014, 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 are zeroing in on a similar property tax report for 2015. That report shows property taxes will go up next year, even with aids and credits. However, analysts caution the 2015 numbers are highly speculative and make a rough guess and what local governments will do with their property tax levies.

"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.

Minnesota's property tax rates are a combination of levies of local government, schools and the state, which means they can vary wildly from community to community.

"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."

The lead author of the report cautioned that the figures for aids and credits are only 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 analysts know for sure, said Steve Hinze, a legislative analyst in the research department of the Minnesota House of Representatives.

Calculating aids and credits, as Democrats are counting on, gets murkier, he said.

The numbers "are actually pretty speculative because there is a new initiative aimed at getting more eligible taxpayers to apply for refunds this year, and no one really knows how successful it will be," Hinze said.

Democrats say the only number that matters is what Minnesotans actually pay, which will be lower once they receive their aids and credits.

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