By Marlowe Hamerston
MnSF property tax/income security committee

At both the spring 2006 Metro Region convention and the South Central Region convention, property tax reform was voted the No. 1 issue. Recent actions of the legislature have shifted local funding responsibilities from state funding sources to local property taxes.

The problem with this shift is that our state funding sources, income and sales taxes, have limits as to the percentage of one's income that can be taken by these taxes, but the property tax has no such limit. The property tax can take any percentage of a homestead property owner's income that an assessor's guess of your property's value creates - a tax that bears no relationship to the homeowner's ability to pay.

The taxation system that best meets the "ability-to-pay" criteria is the income tax. MnSF had a proposal to use a flat local income tax of 2 percent of household income in place of the present homestead property tax system. Pennsylvania uses a partial-income tax system to fund their local governments.

MnSF found little legislative support for income tax-based reform. Opposition was founded on the concern that an income-based system of funding local government would catapult Minnesota into the top-ranking among states in the amount levied by income taxes.

MnSF's next proposal was to compute one's property tax from one based on a property's value to one based on a percentage of the property owner's household income, about 1.95 percent of household income.

Once again, legislators could not differentiate between what was good reform of a bad taxation system and their nonsensical concern with income tax rankings.

Historically, Minnesota legislatures have used rebates as a way to placate homestead taxpayers. This procedure costs state government a great deal of money and the core problem is still not solved. The Homestead Credit and Property Tax Refund programs cost the state close to half a billion dollars each year. Can this money be better spent?

The answer to this question is yes!

To fund reform the sacred cow known as the Homestead Credit must be sacrificed. The purpose of the Homestead Credit is to aid homestead property owners to pay their property taxes. The truth is that the Homestead Credit is not directed at those in need, but is based on a home's value. It makes no difference what the income of the homeowner is.

For 103 cities, the Homestead Credit already does not exist. In 2003, as part of the budget balancing process, local government aid (LGA) was cut. There were 103 cities that did not receive LGA and their funding could not be cut on that basis. For these cities, the approach used was for the state not to pay the Homestead Credit. The 103 cities would have to pay their own Homestead Credit by the only means at their disposal - by increasing property taxes. These communities had to raise their property taxes in order to pay for a property tax rebate. That's absurd.

Using the funding available from the discontinuance of the Homestead Credit not only covers the cost of establishing a 4 percent limit for every Minnesota homestead property owner but there is $75 million left over. It is hard to figure how Republican legislators, who claim to be the watchdog for Minnesota taxpayers, can ignore a saving of $75 million. It is just as hard to figure why DFL legislators made no effort to tap the $75 million and use it to fund those important programs that they claim lacked funding.

It is the hope of MnSF that the coming election will produce a legislative body and governor that will take action to reform our system of funding local government. The MnSF tax committee shall press for an absolute limit to the percentage of one's income that can be taken by the property tax for homestead properties. The Property Tax Refund program shall remain in place for both homeowners and renters.

It is up to all Minnesotans to press every candidate for our legislature and governorship to commit to putting an end to unlimited taxation. Candidates must commit to establishing a limit to what can be taken by the property tax just as there are absolute limits to the income and sales tax. Why should the property tax be different? If a candidate will not commit to ending the tyranny of unlimited taxation, they do not deserve to represent you in Minnesota's legislature.