St. Paul, MN- Members of the House DFL
Property Tax Relief Committee unveiled their plan on Monday to provide
significant and permanent tax relief to Minnesota homeowners, as well as
increase the fairness of our state's tax system.
State Representative Aaron Peterson said the bill is an important
step forward in returning balance to the state property tax system,
which has spun out of control in recent years.
"Since 2003, our state government has asked property owners to pick
up the tab for services that have historically been covered by the
state, such as education and local improvements and services," said
Peterson. "As the result, property taxes have increased by $1.7 billion,
and are projected to go up by another $600 million next year.
These increases are forcing people out of their homes and hurting
young families and small businesses."
The reform bill provides $543 million in property tax relief through
a series of initiatives, including a $133 million buyback and indexing
of School Levy Aid. The centerpiece is a new Homestead Credit State
Refund that provides reform by building more fairness into the tax
system. Specifically, if a person's property tax bill is more than 2% of
their income, they will get a certain percentage of the amount over 2%
refunded to them, based on income. This provision will provide $223
million in direct relief to Minnesota homeowners.
"Property taxes are a stable source of revenue that cities can depend
on, but they were never meant to be the main funding source," said
Peterson. "This bill will offer significant relief to every property
owner in the state – and it's about time."
The bill creates a 4th tier of income tax, with every dollar of new
money going directly into property tax relief. This plan will affect
couples who earn $400 thousand or more, after deductions, and single
earners who make $226 thousand, again after deductions. Approximately
81% of the 4th tier will be made up of Minnesotans who earn $1 million a
year or more.
According to the Minnesota Department of Revenue's tax incidence
report, the highest earners in our state are actually paying a smaller
percentage of their income in taxes than the middle class. Specifically,
by 2009 the richest 1 percent of Minnesotans, those making more than $1
million a year, will pay 8.9 percent of their income in state and local
taxes. By contrast, those who make between $34 thousand and $52 thousand
will pay 12.5 percent in total state and local taxes. This bill will
bring more fairness to Minnesota's income taxes, according to Peterson.
"The question really becomes, how do we pay for the services
Minnesotans value the most?" said Peterson. "We need a progressive tax
system that does not place an undue burden on young families just
starting out, seniors on fixed incomes or small businesses.
I believe when Minnesotans consider the options, they will agree this
plan creates more tax fairness, while at the same time offers a benefit
to every property owner in the state."