House Democrats on Wednesday made their opening move on a $250 million property-tax-relief package – a key priority of DFLers across state government – but significant differences remain between Gov. Mark Dayton and leaders in the Legislature on exactly how they should ease the skyrocketing burden.
A key committee sent the far-reaching $250 million package to be included in the larger House tax bill, and Democrats applauded the measure for addressing a regressive tax that’s increased by 86 percent over the last decade. Dayton and the Senate have outlined different approaches toward the same end.
The House measure would provide $157 million in relief to hundreds of thousands of homeowners, $15.5 million in credits for roughly 75,000 renters and $90 million for local government and county aid that’s couched in a new funding formula.
“What the House DFL caucus wanted to do on property taxes was to respond to the burden that property taxes have increasingly placed on Minnesotans,” Rep. Jim Davnie, whose committee focuses on the issue, told MinnPost after the vote on Wednesday. “While the political debate has said, ‘No new taxes,’ the reality is businesses and homeowners and renters have all been paying a lot more property taxes.”
A consistent refrain
Democrats ran on fixing that issue in 2012, and it’s been a refrain from floor debates, committee hearings and constituents’ front doors for years. House DFLers have listed property-tax relief as one of their main session priorities – Davnie’s legislation is the ceremonial HF 2 – since the beginning of the year.
The bill that passed Wednesday would grant an additional 100,000 homeowners access to refunds and increase them for 300,000 current households by an average of $212.
It would also fill in refunds by an average of $179 for 66,000 renters while opening the door for 10,000 new renters to take advantage of the program. Davnie said the measure was “income sensitive” and aimed at addressing affordability for low- and moderate-income individuals and families.
The $60 million in Local Government Aid and $30 million for County Program Aid are tied to a new formula that proponents say will give greater stability for municipalities.
“We had a formula that the state broke over the last five years. We took an axe to it, and it no longer worked to do what it was supposed to do, which was to assure adequate services in all communities across the state,” Davnie said.
Stable going forward
Discussing the new proposal, he said, “It’s stable, and local governments can go forward and plan and function without worrying next year all of a sudden they’re going to get caught in a bind and have to raise your property taxes again.”
The House plan, now fully detailed, is a far cry from Gov. Mark Dayton’s ambitious first attempt at property-tax relief.
In the governor’s January budget plan, he proposed a $1.5 billion property-tax-rebate program that would have given up to $500 to homeowners across the state. When Dayton dropped his $2.1 billion sales-tax expansion, much of that property-tax relief had to go with it, as well as a number of other far-reaching business tax reforms.
His newest budget proposal from March includes $19 million over the next biennium for a renters credit program. The governor’s approach would mean nearly all of Minnesota’s 334,000 renters would receive an average rebate increase of $57, according to executive branch estimates.
Dayton’s updated proposal also includes an $80 million increase in city and county aid, as well as a formula update.
Major difference from Dayton proposal
The governor and the House appear to differ philosophically on one key area: Dayton targeted a much wider swath of Minnesotans with his relief, while House lawmakers looked to help a smaller number of low-income citizens with larger economic benefits.
The Senate budget targets, released in late March, so far leave the most up to the imagination. The Senate budget allocates $463 million for tax aids and credits, but it’s unclear which programs DFL leaders there plan to fund.
Senate Majority Leader Tom Bakk said in late March that the Senate’s figures for city and county aid would be near Dayton’s $80 million mark. It’s also likely that property-tax relief will come for homeowners.
“The only real difference between the House and the Senate is we put a higher priority on property-tax relief, they put a higher priority on paying back the school shift,” Bakk said, forecasting that the Senate tax bill would take shape in mid-April.
“Both are very important to Minnesotans. I share both of those priorities. We just couldn’t figure out how we could raise enough money to do both.”
With full control over state government for the first time in two decades, DFLers now have the ability to take a look at the state’s entire revenue system. Dayton has outlined roughly $1.8 billion in revenue increases to invest in education, property tax relief and economic development, as well as address the state’s $627 million budget deficit.
Chief among those revenue hikes is a $1.1 billion fourth-tier income-tax on the wealthiest 2 percent of Minnesotans. DFL leaders, including the governor, are looking to shift revenue collection from property taxes to income taxes and make the system more progressive in the process.
While it’s unclear exactly where the House and Senate plan to raise the money from, House Speaker Paul Thissen and Senate Majority Leader Tom Bakk have been eyeing higher income taxes for months.
The House and Senate aim to raise $2.4 billion and $2 billion in new revenue, respectively, to meet their budget targets.