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Who'd have guessed? Property tax rates up in Minnesota

A new study (PDF) from the Minnesota Taxpayers Association confirms what we've all suspected: Property tax rates are up in the state and rose faster than market rates.

"This is the first year-upon-year rise in effective tax rates since the early 1990s," says the report.

Some key points in the report:

  • Although effective tax rates remain at historically low levels, "rates based on home values provide little insights about the fairness of the property tax system. A new state database that links household incomes with property tax data should provide new perspectives on Minnesotans’ ability to pay their property taxes."
  • On a statewide basis, commercial-industrial, railroad, apartment and utility property subsidization of residential, farm, and cabin property taxes declined.
  • Also, "commercial-industrial property still provides a substantial subsidy to other types of “preferred” properties. Commercial-industrial property comprises 13.36% of all market value in the state, but is liable for 31.63% of all net property taxes in Minnesota. Comparable numbers for residential homestead property show that such property comprises 54.00% of market value statewide in 2009, while accounting for only 46.40% of net property taxes."
  • Effective tax rates vary considerably from county to county. Overall rates ranged from a low of 0.47% in Rock County to a high of 1.58% in Hennepin County. Homestead rates ranged from a low of 0.31% in Cook County to a high of 1.53% in Red Lake County. Commercial-industrial rates were lowest in Cass County (1.32%) and highest in Mahnomen County (4.29%).

The tax association calculates an "accountability index" for different classes of property, which "measures subsidization by comparing each property class’ share of the total property tax burden to its share of the total tax base."

When that index equals 1.00, it says "owners who live and vote where their property is located (such as homeowners and farmers) pay an appropriate share of property taxes for the local government services provided."

And the group says that currently, residential homestead property is at 0.95, the same as last year, and the highest ever calculated.

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