MARSHALL - State lawmakers professed a constant theme throughout the 2011 session that led to a 20-day government shutdown: There will be cuts and they will affect everyone in some way.
Residents of Minnesota were told throughout the session that tough decisions were coming and were necessary to balance the budget and get the state out of a $5 billion hole, and many of those decisions - like delayed aid to schools, and cuts in Health and Human Services and higher education - got most of the attention after a budget finally was passed for the FY 2012-13 biennium.
But one area that has flown under many Minnesotans' radar is the elimination of the Homestead Market Value Credit - the state's $261 million property tax relief stash.
Created by the Legislature in 2001, the Homestead Market Value Credit directly reduces homeowners' property taxes through a credit on their property tax statements. What essentially has happened is the state will start using that money for things other than property tax relief. What that means is a greater tax burden on homeowners, especially those who live in communities that lack other amenities that could potentially take on more of a tax burden.
Lyon County stands to be out about $570,000 without the HMVC.
"It ends up being an increase in property taxes for taxpayers even if the county doesn't increase the levy," Lyon County Administrator Loren Stomberg said. "If the tax bill was $1 million and the HMVC was $200,000 the taxpayers would end up paying it, the state isn't gonna pay that."
With that credit wiped out, local governments no longer receive that money, so the homeowner will basically be charged the full value of their assessment. With or without the HMVC on the books, the state of Minnesota has become notorious for taking funds from the program. Often, the state has canceled payments, essentially using funds intended to allow cities to make up for lost tax revenues.
"Unequivocally it's gonna mean higher property taxes for just about everybody," District 20A Rep. Andrew Falk, DFL-Murdock, said. "The Department of Revenue estimated a $1.3 billion statewide property tax increase over the next four years as a result of the tax bill that was passed and that's on top of more than $3 billion the last eight years."
Throughout the session, Gov. Mark Dayton had insisted on a tax bump for the top 2 percent of wage earners in Minnesota, but ultimately ended his pursuit of such a tax hike in order to get the budget bill passed. That concession helped get the state back to work, but since Dayton didn't get his way on taxes, the Homestead Market Value Credit wound up a casualty.
"I'm upset that this has happened, because there was an alternative," Falk said. "Instead of asking basically every taxpayer in the state to pay more we could've asked the top 2 percent to start paying their fair share. This is why we have this huge discrepancy in our tax code. It's a shameful outcome that we're seeing."
District 21 Sen. Gary Dahms, R-Redwood Falls, said the tax-the-rich philosophy wouldn't do anything to help the state's economy and would set a bad precedent for the future.
"People can say anything they want; the DFL has a habit of tying everything to taxing the wealthy. What they don't realize is if you tax the wealthy, the next year you have to tax the next level down. 'Tax the wealthy' is a good sound bite, but if they did their research they would see how detrimental that is to others."
Politics aside, Lyon County Assessor Dean Champine said increases in taxes as a result of the elimination of the Homestead Market Value Credit will vary from town to town and that right now it's next to impossible to surmise how much individual taxpayers will be affected.
"It's gonna vary so much," Champine said. "There's really no way to be able to pinpoint it because every town, every township is different because of the mix of properties - between Marshall, Cottonwood, Tracy. Marshall has a much higher commercial base, so it's gonna vary so much; you can't get an accurate number at this time."
Champine said until calculations for proposed tax rates are completed, the county can offer little in the way of tax information - information that will show the percentage change from last year in taxes on every parcel in the county.
"Until the budgets are set that's another thing, what are budgets gonna do?" Champine said. "The city, the county, the townships, school districts, until they set their levies - generally, that's more of a driving force behind tax increases or decreases, how much money are local jurisdictions gonna spend?"
"We'll have some information, maybe late September," Lyon County Auditor/Treasurer Paula VanOverbeke said. "We can't start that process until we have all the certifications in."
Cities and townships must have their certified levies in by Sept. 15, but schools have some extra time - their deadline is Oct. 7 - because of the state shutdown. Normally, schools need to have their certified levies in by Sept. 30.
"As soon as we get everything compiled from all the cities, schools and townships and everybody else that has a levy with us we will start our process," VanOverbeke said. "But since this is such a huge year for this we're gonna try to have them ready sooner."
The proposed tax rates must be sent to taxpayers no later than Nov. 24.
"In the past it was a little easier to give people an idea of what the tax increase would be, but with all the other things going on right now," said Champine.
Nowhere are tax increases as big of a concern than in Lynd, where residents of that school district will vote Tuesday on whether or not to build an $11.5 million school. Voter approval of a new school would mean higher taxes for everyone in the district. Tack on another increase because of the elimination of the Homestead Market Value Credit and they're looking at a double dose of tax reality.
"I've had more questions by far on the Lynd situation than I've had on the change in the homestead," Champine said. "The farmers are gonna probably bear the bigger brunt of that."
The good news for homeowners is under the new tax bill, property tax refunds for homeowners are increased by $30 million, starting with applications filed in 2012, according to Minnesota Budget Project, which recently released an analysis of the new budget bill. The maximum amount of credit is increased, and households with incomes of $10,880 to $93,240 will see larger refunds because of a change in how the refund is calculated.
"There will be some relief to the taxpayers in some other credits they will be receiving," Dahms said. "I'm not sure how that's gonna work yet, but as I understand it there will be relief to individual taxpayers."