Still a very nice deck chair from the Titanic

So, Senator Kevin Dahle’s tweet about LGA sparked a recent post and now my state representative David Bly’s newsletter has me blogging on a related issue.

Really, the issue is how can the public conversation begin to address the relationship between property taxes and their friends (LGA, tax relief of various kinds, business subsidies), the crumbling infrastructure and the services taxes must fund, and what spending decisions we can make to change this landscape for the better.  Perhaps Rep. Bly and Sen. Dahle understand these issues very well, but so far they are only choosing to write the quick and easy stuff for constituents.

Dear Rep. Bly,

Congratulations on your return to the legislature and thank you for your continued service. Just as I took your senate colleague Kevin Dahle to task over his tweet about increasing LGA in response to requests from district mayors, I’m writing to challenge you to consider and, even more important, talk about the larger picture.

In your weekly newsletter of February 8, you said:

I agree with the Governor on his assessment that we need to reduce property taxes. The consistent increase hits low and middle-income earners much harder. Middle class families have been squeezed too much in the last ten years. Wages have remained flat while the cost of living has steadily increased. Many Minnesotans are finding it harder to save for retirement and send their kids to college. As the Governor said, this is not the Minnesota we want to leave our children. We need Minnesota to be a state that invests in its people and provides quality, efficient services.

Your remarks indicate you are concerned about equity for middle and lower income families.  I agree, but question the strategy you endorse for achieving it.  As with my letter to your colleague Senator Dahle, I question whether you are going for the quick fix without even attempting to figure out how to improve the tax system in the longer term for a sustainable state budget.

In particular, the relationship among taxes, local government costs, and policy choices which have skewed the market and the landscape remains unexamined, but it is these structural issues which desperately need your attention. My vote in the next election for you or any politician depends entirely on your contribution to shifting the conversation from short term fix to sustainable policy.  In addition the issues I raised for Senator Dahle, I have these questions:

How regressive are MN property taxes?  A new report Who Pays? evaluates state tax systems for regressiveness; sales taxes are much more regressive than property taxes, but I urge you to take a look at Minnesota’s overall tax burden on its residents and how regressive it is.  Minnesota’s sales tax was created to fund property tax relief back in 1967; this seems like a very inequitable method for change.  Please also consider how previous legislatures have tried to shift the burden to commercial/industrial property with higher class rates and the state general tax; this shift creates superficial equity for homestead tax payers while imposing an obstacle to our economic drivers who, typically, require fewer city services.  Again, please evaluate how the system is balanced rather than simply reducing one component.

Property taxes, housing costs and location: The size of homes has been increasing since the 1950s and, as a result, so have the taxes.  Part of the housing and transportation cost equation depends on where we live relative to where we work, too.  Since your district has Northfield, Londsale and other communities which became more attractive to commuters to the metro area in the last decade, there are also many homeowners who pay a great deal in transportation plus housing.  “Drive ’til you qualify” may have yielded more house for the money for individuals, but also increased household costs. So, it is not too surprising to read that housing and transportation costs taken together are outpacing incomes.  If households are paying more of their income for housing and transportation, then property taxes will be more of a burden.  Before cutting taxes, think about how the incentives for more efficient and economical development can help reduce both government and homeowner costs.

How good is Governor Dayton’s plan?  I’m not impressed.  MinnPost’s Steve Dornfeld critiques the plan and finds 3 big issues: increased complexity (see the final report from the Property Tax Working Group, too), creating new inequities, and providing incentives for local governments to raise taxes in the future. I’d add that Gov. Dayton’s plan adds economic development policies which will continue to incentivize the race to the bottom which will continue to use tax dollars to lure business to Minnesota through tax abatement and infrastructure subsidies while also including new sales taxes for business services which follows the historical pattern of trying to offset property tax issues with sales tax.

As I said to Senator Dahle, I’m counting on your leadership to help develop policies which benefit all Minnesotans for the long term, not just the constituents yelling at you right now.  Of course, I also know that change happens incrementally as you work to build support and make compromises (and that’s just within the DFL) and that I am asking for a staggering amount of reform, but I am looking for you to shift the conversation away from reactive government to thoughtful, sustainable policy-making.  Good luck!

Sincerely,

Betsey Buckheit