Toward a less regressive property tax with the Lenczewski-Marquart proposal

How regressive are residential property taxes? Very. Way. Hugely.

Households in the top 1 percent of incomes (those making more than $450,000) are projected by the 2007 Minnesota Tax Incidence Study to pay on average about 0.7 percent of their income in residential property taxes in 2009. A regressive tax means people who earn less would pay a higher percentage of their annual income in taxes, and that's exactly what we see with the residential property tax.

According to the study, the average Minnesota household will pay about 2.5 percent — more than 3 times the effective tax rate of the top-enders. Those earning just below the median income will pay about 3.5 percent of their income in property taxes — or 5 times the effective rate at the very top.

That's why it was so encouraging this week to see state Reps. Ann Lenczewski (chair of the Taxes Committee) and Paul Marquart (chair of the property tax subcommittee) come forward with a very straightforward reform proposal aimed squarely at reducing the regressivity. Their bill, H.F. 1222, is similar in some respects to legislation proposed last year that was even better, and which included the restoration of higher income tax rates to reduce regressivity. 

The latest Lenczewski-Marquart concept is revenue-neutral, meaning it doesn't cost taxpayers as a whole any more or less. But on average, according to preliminary research produced by legislative staffers, those with incomes higher than about $160,000 would pay modestly more and those with incomes below that level would get a bigger break.

The individual benefits and costs are highly variable and would depend on the relationship of a household's income to its property taxes. But if your property taxes amount to more than 2 percent of your income, you would be eligible for the new Homestead Credit State Refund.

Check out the Minnesota Budget Project's  take on the proposal in its new "Budget Bites"  blog. Also, check out news coverage of the proposals, along with positive reaction to the concept from Growth & Justice,  in both the Star Tribune and the Pioneer Press Tuesday.

— Dane Smith

Comments

[Bernie Bauhof]

Property tax is based on the market value of your property.Your proposal suggests that if two poeple have a house wth the same market value, the person with the higher income would pay more property tax. That is just not good policy.