Tuesday, January 3, 2012

Minnesota’s property tax Ponzi scheme

Every legislative session for the past 40 years, many state legislators have had the urge to dress up in the proverbial red suit, don a fake white beard and play Santa Claus for Minnesota homeowners. The charade that has been played out every year since 1967 is commonly referred to as the “Homestead Property Tax Credit.” Legislators don’t want voters (especially homeowners) to blame them for rising property taxes, so they invented the term “homestead credit.” Like most Ponzi schemes, it’s just another method of moving the money around so no one really knows what is happening.

In this shell game, legislators direct state tax collections from sales and income tax dollars back to cities and counties through a variety of aids and credits in order to deceive property owners that they are paying less in taxes.

This process started in 1967 when the Legislature overrode Gov. Harold LeVander’s veto of the state’s first sales tax. The scheme was to implement a new tax revenue stream and then use a portion of the new revenue to buy down property taxes for homeowners across the state. It started as a 35 percent credit of a homeowner’s property tax bill, up to $250. In subsequent years, the credit has changed dozens of times, always with legislators taking credit for being the property tax Santa and delivering the gift of lower taxes.

But in any good political drama, there is always a counter group, the bunch of angry elves with the claim that some boys and girls got left out.

This year is no different. Republican lawmakers made a change in the method of calculating property tax aid resulting in a shift of those that received state property tax relief. Despite the fact that property tax levies will increase statewide by only 1.2 percent in 2012, DFL lawmakers are claiming that the Grinch (Republican legislators) stole Christmas.

The fact is that property owners across the state continue to pay an ever-increasing amount in property taxes because city and county governments continue to spend more.

Some people think that because the value of their home is declining, their property taxes should also decline. This premise is incorrect if their local government’s spending is not declining at the same rate.

The simple truth is that until the Legislature ends the property tax Ponzi scheme, no homeowner will be able to determine the real cost of local services in their community. City and county officials hide behind this property tax Ponzi scheme claiming they have no control of the process and that they are mere pawns in the legislative game.

It’s time for the Legislature to stop playing Santa Claus to property tax owners by paying out hundreds of millions every year in gifts to cities and counties for property tax relief. End the property tax Ponzi scheme and make local government officials accountable for their spending.

Opinion letter [emphasis added] by Phil Krinkie, a former eight-term Republican state representative from Lino Lakes who chaired the House Tax Committee for a while, is president of the Taxpayers League of Minnesota. The letter appeared at www.inforum.com.

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