The folly of "buying down" property taxes

City, county, and township levies are up $67 million this year. School district levies increased by $40 million. And other levies are up $18 million. It all adds up to a $125 property tax increase in 2014, and the highest property tax levy in state history.

Governor Dayton and his Revenue Department claim that property taxes are actually down $8 million when state credits and refunds are factored in. This argument is disingenuous at best. But even if it were true, it is nowhere near the tax relief promised by liberal lawmakers last year. And, it demonstrates the folly of having the state allegedly “buy down” property taxes.

Consider, the property tax increases follow a session in which legislators significantly boosted local government aid (LGA) to cities, gave a sales tax exemption to local governments, and provided assorted bailouts and other assistance to cities and school boards. LGA alone increased more than $160 million from the previous biennium. We were promised that these measures would somehow hold down property taxes.

But as we wrote about these policies following the 2013 session: “While local government advocates tout the short-term fixes offered by our spendthrift state government, these policies hurt state and local taxpayers in the long term. The governor and state legislature have weakened the bond between local spending decisions and local tax decisions, and weakened the bond between government and the citizens it serves and taxes. The result is a less accountable government with little incentive to pursue policy innovation or operating efficiency.”

We were wrong about one thing. Those “short-term fixes” failed even in the short-term to prevent property tax hikes. Lawmakers who assured taxpayers that LGA, tax breaks, bailouts, and other state assistance to local governments would prevent property tax hikes are now left to explain the $125 million increase, essentially telling people to ignore their lying property tax statements.

And the $125 million is just the beginning of the local tax increases, because the governor and legislature also gave local governments the power to impose new taxes and increase existing taxes more easily, with minimal public input. For example, all 87 counties now have authority to impose wheelage taxes, and dozens have already voted to do so. Counties may now levy a half-cent local retail sales tax for transit and transportation projects, and school boards now have taxing authority that previously belonged to voters.

Not only did state lawmakers fail to hold down property taxes, they made our tax system less transparent and our local governments less accountable. Worst of all, they are congratulating themselves for this “accomplishment”.

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