Trying to make sense of one’s property tax bill can be difficult, especially if it is drastically different from that of the neighbor next door. At a December 15, 2009 truth-in-taxation public hearing, County Auditor-Treasurer Braidy Powers and County Assessor Mary Black tried to explain the complexities of taxation.
The system used in Minnesota has advantages and disadvantages, Powers told those in attendance. Disadvantages include the following:
1. State and federal laws mandate, but do not fully fund, certain services that are paid by property taxes.
2. Property taxes are regressive. That is, the tax is not directly related to the property owner’s ability to pay it. For example, property values, and consequently the tax paid, may increase dramatically in spite of any action by the owner and without regard to the taxpayer’s income.
3. The system is extremely complex. The complexity can be the result of attempts to make it fairer. “The differences between class rates (property classified as commercial, seasonal, homestead, etc.) have narrowed over the years, somewhat negating the purpose of the program, but now there are more that 50 separate applications of class rates,” Powers said, also noting the Limited Market Value formula. “This is a formula that limited annual valuation increases when real estate prices were making great leaps. It ended in 2009, causing many properties to ‘catch up’ to the full estimated market value for taxes payable in 2010.”
4. Tax Increment Financing. TIF is a complicated method of promoting development by delaying the payment of property taxes for many years into the future.
5. Iron Range Fiscal Disparities. This is a method for the northeastern counties to share commercial/industrial valuation increases by pooling valuation increases since the base year of 1995 and imposing the average area-wide tax rate to those properties.
6. State General Property Tax. This is a property tax imposed by the state on commercial and seasonal properties since 2002. Thecounty calculates, collects and remits over two million dollars annually to the state.
7. Homestead Credits. Homestead properties receive two types of credits in Cook County. The formulas used to determine the credits are radically different. The Market Value Credit increases from $0 to a peak of $304 for properties up to $76,000 in market value and then declines for every dollar of market value above $76,000 until it returns to $0 of credit at $414,000 of market value. The Taconite Credit increases until it peaks at $289.80 ($315 for Schroeder only) and remains there.
One advantage of local taxes is “that they are likely to be more responsive to public needs and more directly accountable to the public than state or federal taxes,” said Powers, “and they are relatively stable compared to other forms of taxation. However, local control is minimized to the extent that the state and federal government imposes mandates.”
Truth in taxation? Somewhere in the numbers and the confusing laws there is truth, but just what that is may be beyond anyone’s total grasp.
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