Carlson, legislators divided onplans for $1.4 billion surplus

MINNEAPOLIS (AP) — Use the state’s $1.4 billion budget surplus to lower property taxes instead of paying for a one-time income tax rebate as Gov. Carlson proposes, many legislators say in a new survey.
Carlson wants to return about $261 million for an average rebate of about $130 per tax filer later this year. About two-thirds of the legislators who responded to the Star Tribune’s survey oppose rebates. Only 17 percent support them.
But three in five of the legislators surveyed Dec. 4-23 said they favored using part of the surplus for property tax relief.
Of the 201 legislators, 149 responded to the survey. The margin of error is 3 percentage points.
The survey was conducted by phone, except for those legislators who requested mailed questionnaires.
Slightly more than half of the legislators who responded did not believe that commercial property taxes should be reduced, despite complaints from business owners that Minnesota has the highest property tax rates in the nation.
Fifteen percent of the legislators surveyed said the surplus should be applied to an overhaul of the property tax system.
“We have a perfect opportunity here,” said Rep. Dee Long, chairwoman of the House Tax Committee. “Property tax reform is nearly impossible to do when you don’t have money to smooth out the edges.”
Critics say Minnesota’s property taxes are too high.
The state taxes commercial and industrial property at a rate 4.5 times higher than “homesteaded” or owner-occupied homes. Minnesota has the highest business property tax rate in the nation, according to a 1996 Minnesota Taxpayers Association report. Still, business is flourishing in the state and has for years.
Apartment owners are also taxed at a higher rate because they don’t get a homestead credit, and at least part of the cost is passed on to their renters.
“You’re depending on 17 percent of the property value to contribute 35 percent of the property taxes,” said Minnesota Revenue Commissioner Jim Girard. “That can’t go on forever.”
Critics also say the tax structure is too complicated.
“I’ve been here 27 years,” said Mike Wandmacher, director of property taxes for the Revenue Department. “And we’ve had so many piecemeal fixes over the years that we are to the point where no one really understands the system fully anymore.”
The property tax system has its defenders, though.
“We’re very leery of changes in the property tax system,” said Wayne Cox of Minnesota Citizens for Tax Justice. “Anytime they talk about changing, it seems that homeowners are the ones that would wind up getting hammered.”