Utah Attempts to Boost Revenue through Sales Tax

Utah, one of the few states that places a tax on basic food just did this in an effort to increase the tax base. They leverage a nearly 3% hike on food with a .3% decrease in taxes on other "items".

Utah Senate Passes Bill To Raise Food Tax

By Associated Press

POSTED: 1:54 pm MST February 28, 2011

SALT LAKE CITY -- The Utah Senate passed a bill that that would raise the tax on food, but lower taxes on other items.The Senate approved Senate Bill 270 on a 19-9 vote on Monday. It now moves to the House.Republican Sen. Stuart Adams of Layton says the measure would add stability, since most food sales don't drop during an economic crisis.Under the bill, a 1.7 percent tax on food would rise to 4.4 percent.But sales taxes on other items would be lowered from 4.7 percent to 4.4 percent.Opponents say the tax hike would hurt low-income people the most, especially those with limited means to feed their families.

Copyright 2011 The Associated Press.

Public Workers and Government Finances

We haven't talked about public workers in class yet, but it's an interesting topic that's getting a ton of attention these days and can have a significant impact on the finances of state and local governments. Check out this article from Time Magazine for some interesting analysis.

Cigarette Sales Tax in New York State

In last week’s class, the topic of black market cigarettes was briefly discussed. Our textbook also addresses the topic in a short article on pages 394-395. In this blog post I want to expand on information concerning sales tax on cigarette and its effect on black market trade.

A great resource to consult is the research completed by The Center for Public Integrity an organization that does investigative journalism and has completed reports on a wide variety of issues including the environment, sexual assault, and the Iraq war. The Center for Public Integrity finds that because of smuggling nations miss out on $40 billion of tax revenue annually. About one billion dollars of that money is solely lost in New York state, “In 2007, New York’s reservations — home to fewer than 17,000 people — sold a towering 6.4 billion cigarettes…every year, the state loses nearly $1 billion in city and state taxes from reservation sales (Willson).” The supply chain of the trade is shown in the diagram below:

To learn more about the New York cigarette black market, check out this video (Willson):

In addition to selling cigarettes to convenience stores in New York, the reservations have increased the illegal trade of cigarettes nationwide. Many Americans purchase cigarettes through websites that dodge the sales tax. The prevalence of these websites increased substantially from 88 in 2000 to 772 in 2006 with the majority of these sites being controlled by smoke shops on New York reservations (Chen). In 2008, New York passed a law that required the reservations to apply sales tax to cigarettes they sell to people not a part of the reservation. Although the trade continues, businesses have been charged with tax evasion (Hernandez).

The situation in New York leads to some interesting questions about the rate of sales tax and cigarettes. Does increasing the state’s sales tax actually lead to an overall increase in revenue or is that revenue lost to the efforts to counteract the negative consequences of an illegal market (i.e. increased policing because of gang violence)? Will additional policies to prevent smuggling effectively counteract the economic forces that drive the black market trade of tobacco? Should the government continue to use sales tax as a means to decrease cigarettes use?

Sources:

Chen, Te-Ping. "SMOKE2U." The Center for Public Integrity. 19 Dec. 2008. .

Hernandez, Javier C. "Illegal Indian Cigarette Sales Uncovered, Bloomberg Says." City Room. New York Times, 16 Sept. 2010. .

Willson, Kate and Marina Walker Guevara. "Big Tobacco’s New York Black Market." The Center for Public Integrity. 19 Dec. 2008. .

Who really loses out by not taxing clothing?

Minnesota instituted its sales tax in the 1960s at 3%. It currently stands at approximately 6.875% and is among the higher sales tax rates in the country. As noted in class, we have a complex system of taxing various services, yet we have a relatively small tax base because of various exemptions such as no tax on clothing.

Two recent gubernatorial candidates both proposed instituting a sales tax on clothing as a method of addressing Minnesota's looming budget shortfall. That deficit is currently projected at ~ $6.2 billion over the next biennium. Tom Horner proposed expanding the sales tax to clothing while reducing the tax rate by 1%. Horner's proposal predicts that $1.3 billion per biennium could be raised through this enactment. Tom Bakk (whom was not a final gubernatorial contender) proposed extending the sales tax to clothing at its current rate and then lowering the rate over the next few years. He predicts that in the first year $257 million would be collected. After that the rate would be reduced to 6.25% and still produce $120 million dollars.

Former Governor Pawlenty, and others, oppose this extension, arguing that tax free clothing gives Minnesota an economic advantage over other states and spurs more tourism and business through shopping. It's true, we enjoy a distinct advantage of being one of only 5 states that has no sales tax on clothing. And we enjoy a great deal of tourism due in part to this, as the Mall of America (MOA) is one of the country's top tourist attractions. I agree that a full implementation of the sales tax to clothing would decrease the attractiveness of the MOA, particularly on a global scale, but would the increase in that tax base for state potentially not offset this loss? I imagine that if the rate is still lower than in other states, the other qualities of the MOA that draw people to it would still encourage tourism. I think a better solution would be to consider establishing the tax rate on clothing at a lower rate than the general sales tax, say at 3%. This would be substantially lower than many other states, yet increase the revenue base for Minnesota.

Many also argue that broadening the sales tax would only further regressivity. As noted in Kelly's post below, some believe that not taxing clothing actually benefits the wealthy more than those with a low income. Instituting the clothing sales tax at a lower rate, as suggested above, could further contribute to lessening the regressive nature of sales tax. We could also consider only taxing certain items of clothing, or charging a higher rate of tax on "luxury clothing". Selective taxing on clothing and a luxury tax may help in equity, but it may also be administratively unfeasible to implement.

It is clear that Minnesota is at a critical point in considering her revenues and expenditures. I think it has been made clear that simply cutting services will not balance a budget. Expanding the sources of revenue for the state by means of implementing some sort of sales tax on clothing may be an instrumental part of the solution.

Mayors seek Dayton, GOP compromise to save LGA | Minnesota Public Radio News

Mayors seek Dayton, GOP compromise to save LGA | Minnesota Public Radio News

A short article on LGA and how it effects local gov't budgets.

VMT Tax - A Viable Revenue Source?

There is a trend in the United States that fuel consumption is not increasing as quickly as vehicle miles traveled (VMT). A study on direct usage based charges for transportation funding by RAND found that, “ Since 1980, VMT has doubled while fuel consumptions has increased by only 50 percent.” (Implementable Strategies for Shifting to Direct Usage-Based Charges for Transportation Funding) The method of collecting taxes based on fuel consumption versus on how many miles one drives, has become problematic with improved fuel economy because the government is not able to produce enough revenue to build and maintain our transportation systems. It seems that this tendency will only continue into the future.

“If fuel consumption drops by 20 percent by 2017, a goal set by President George W. Bush, gas tax revenue will drop as well. But it could fall far faster. President Obama mandated that new cars get even better mileage…” (Racking up miles? Maybe not.) However, as of 2009, even though U.S. Transportation secretary Ray LaHood is willing to consider a VMT tax to help pay for our nation’s transportation systems, President Obama says no. (VMT tax smackdown: LaHood says "maybe", Obama says "no")

This trend in lower gasoline consumption and higher vehicle miles traveled is cause for alarm among policy makers and the general public. This topic has sparked debate among many to look to other forms for gaining revenue to maintain the nation’s transportation systems.

Can a 1% Sales Tax on Basic Tax-Exempt Goods Save Rhode Islands Budget?

In light of a $295-million projected deficit next year, Rhode Island Governor Chafee has proposed a 1% sales tax “on the dozens of currently exempt items, including food, clothing and prescription drugs.”[i] This proposal has a potential to raise $89 million in annual new revenue. Other legislators are proposing bills to add sales tax to luxury items including expensive clothing and yachts.

The alternative proposals stand on the ground that basic clothing should not be taxed because it would be regressive taxing, adversely affecting lower-income residents. However, if someone can afford a yacht, they can afford the 7% tax on it (currently exempt as a luxury item). Other proposals suggest lowering the luxury clothing tax from $500 items to $175 items like Massachusetts. This increase will raise the tax on an additional $325 of a $500 item.

The problem with the legislators’ proposal is that luxury items are not efficient. They are highly elastic – where an increase in tax will reduce consumption. Overall fewer of these items are purchased and without running the numbers, an increase in luxury tax will not likely raise the same amount of money as a 1% tax on all basic exempt items.

While a 1% tax on basic items may raise more money to balance Rhode Island’s budget deficit, it would be regressive and inequitable by effectively taxing lower-income people more than higher-income people. As Rhode Island has been facing some of the highest unemployment rates in the nation – before the recession even hit the whole country – the impact of this bill on an already hard-hit segment of the population would be a real blow. What’s a state to do?

The Mikesell article suggested for this week’s reading provides evidence that clothing tax exemptions actually provides “greater relief to high-income as opposed to low-income families. It therefore reduces revenue yield . . . without the desired equity effect.”[ii] Governor Chafee is willing to take recommendations and make changes to his proposal. I would suggest that he refrain from taxing unprepared food and basic prescription drugs, but adding a 1% tax to clothing, and taxing luxury goods – either at $175 instead of $500, or the entire amount – would create significant revenue while balancing equity and elasticity of the tax base.

Link to article: http://www.projo.com/news/politics/content/Chafee_sales_tax__02-17-11_27MHQHI_v21.1af78bf.html

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[i] http://www.projo.com/news/politics/content/Chafee_sales_tax__02-17-11_27MHQHI_v21.1af78bf.html

[ii] Mikesell, John. The American Retail Sales Tax: Considerations on Their Structure, Operations, and Potential as a Foundation for a Federal Sales Tax.

Billion Dollar Boondoggle — How Online Retailers Avoid Collecting Sales Tax and What Can Be Done About It

Next year, states will collectively lose out on approximately $11.4 billion in sales taxes on goods sold via the internet. That figure, published in a 2009 study by the University of Tennessee, should have most state lawmakers gnashing their teeth as they struggle to balance their state budgets. The inability of states to collect sales taxes on most internet sales stems from a 1992 Supreme Court case — Quill Corp. v. North Dakota — that requires a business to have a physical presence in a state in order for it to be required to collect sales taxes. With e-commerce making up a growing percentage of sales, states will continue to see a big hole in their sales tax receipts as internet transactions continue to rise.

Recognizing this situation, New York passed a law in 2008 (dubbed the Amazon Law) that compels companies who operate affiliate programs within its borders to collect sales taxes. Affiliates — such as newspapers, bloggers, and other companies with a web presence — receive commission for posting links on their websites that viewers click to access online retailers’ websites. If online retailers generate more than $10,000 in yearly sales through these affiliates, then the Amazon Law requires them to collect taxes on all of their sales, not just the $10,000 generated through the affiliates. So far, this law has resulted in tens of millions of sales tax revenue.

The benefits of such legislation don’t stop with sales tax revenue, either. As the prices for online products adjust to reflect the additional tax, local bricks-and-mortar enterprises enjoy a boost to their competitiveness. Goodbye, price advantage for Washington-based Amazon; hello, normal prices at Minnesota-based Majors and Quinn. Suddenly your prices seem . . . equal. Furthermore, because higher-income earners tend to comprise a higher proportion of online buyers, the regressiveness of the sales tax levels out a bit, as their newly generated sales tax revenue starts paying for many of the services provided by state and local government.

The Coming Shutdowns and Showdowns: What’s Really at Stake

Today and tomorrow Kerri Miller on Midmorning is featuring commentators discussing the budget crisis and debate underlying the protests in Wisconsin.

One of her speakers today was Robert Reich, who has posted some great commentary about the showdowns (now in Wisconsin and Indiana), and potential shutdowns, of government ahead of us:

The Coming Shutdowns and Showdowns: What’s Really at Stake

http://robertreich.org

More on the Value-Added Tax - An Alternative to Sales Tax?

Earlier Chris Berrens posted on the value-added tax (VAT). I also felt compelled to expound on the VAT due to its relevance to sales tax and global prominence. As Chris mentioned, most of the rest of world utilizes the VAT as seen by the dark-shaded countries in the map below (updated 2008).

The VAT differs from a sales tax, in that instead of taxing a good at the point of sale on the consumer, the product is taxed along the production line as value is added to the product as demonstrated in this graphic.

So while most of the rest of the developed world has utilized this popular form of taxation, why hasn’t the U.S. opted for this policy? It is generally considered to be very feasible with low administrative costs and is also quite adequate at raising sufficient revenue (Source). This New York Times article also finds the VAT to be better than equivalent sales taxes for two key reasons:

First, if a single business evades the value-added tax, the government does not lose a large portion of money, because it will collect taxes at other stages of production.

Since companies usually get credit for taxes already paid by their suppliers, companies will pressure other businesses in the production chain to prove they paid their taxes. That means the system is somewhat self-policing.

The VAT does not go without criticism however. As with sales tax, there are equity issues with the regressiveness of the VAT. Similar to the way Minnesota exempts clothing and unprepared food from sales tax, many countries using the VAT exempt similar items to make the tax less regressive (Source). Other countries, such as Australia, combat the regressive aspect by having an aggressively progressive income tax (Source).

Despite its pros and cons, the VAT’s biggest hurdle to being used in America is likely the political feasibility. As mentioned in class, the cost associated with switching to such a system may be prohibitive or at the very least unpopular. Additionally it appears that the VAT’s own popularity (especially in Europe) may even be working against it. Back in November, the then-prospective House majority leader, Eric Cantor dismissed the potential of implementing a VAT, commenting: “I don’t think any of us want us to go the direction of the social welfare states around the world.” I’ll let Paul Krugman respond.

The Property Tax Refund and LGA

There is an implicit agreement between the State of Minnesota and its cities and counties. They (cities and counties) will use property taxes to gather revenue, so that the State can use sales and income taxes. There are some exceptions, where cities have to get permission from the legislature in the form of a bill, to levy a sales tax to pay for capital improvements. Two examples are: 1) the percentage tax in downtown bars in Minneapolis to cover expenses on the Metrodome, which is still being levied almost thirty years later, and 2) the Hennepin County sales tax to pay for the Twins Stadium.

Cities have only been able to increase property taxes to make up for the reduction in aid. The restrictions on taxation, based on initial agreements between cities/counties and state governments has made the LGA cuts even worse for low income, property owning citizens. LGA is meant to equal disparities between cities and counties across Minnesota. If LGA did not exist, the tendency would be higher for people to live in areas with lower taxes near those with higher services and taxes, such as Dr. Zhao's Ypsilanti/Ann Arbor example.

If cities such as Saint Paul and Minneapolis raised revenue from sales and income taxes it would cause an imbalance in the funds available to the places where people tend to live, such as the suburbs, but the cities would have a larger operating budget. Alternatively, cities such as New York Mills, South Haven, or Glencoe might have lower property values and a small enough population that they can't raise the minimum funds from that tax base to provide basic services.

Besides LGA, the property tax refund (PTR) has the greatest benefit reducing disparities to low income residents, especially where taxes are higher, such as the metro regions across Minnesota. However, the property tax refund has been significantly reduced over the past ten years. This has only compounded disparities in taxation, and exacerbated the foreclosure crisis by reducing help to property owners most likely to need tax reductions to help pay their mortgages.

The graph to the left shows the growth in both residential homestead property taxes and a lower trending homeowner property tax refund (primarily meant to offset income disparities) from 1975 to 2008. The scale for taxes illustrated is ten times that shown for property tax refunds. Total refunds have decreased in real terms since 1975, when total refunds of $82.6 million equaled $330.5 million in 2008 dollars after adjusting for inflation. The graph below shows how property tax aids and credits from the State’s General Fund have generally been reduced over the past 10 years.
Source: 2010 MN House Research Department

Who Bears the Burden?

Our class discussion and readings for this week focused on the much hated and often debated property tax. Part of what we asked was, "Is Minnesota's property tax regressive?"

The 2009 Minnesota Tax Incidence Study is conducted every two years by the Department of Revenue to find out just who pays Minnesota taxes. Using 2006 data, the report explores who bears the burden of state and local taxes. So, what did they say about property taxes?

The study shows that in 2006, the effective property tax rate ranged from 7% for the first population decile (households making $9,782 or less) to 1.3% for the top decile (households making %123,939 or more). Holy moly, that's regressive!

Fortunately, Minnesota Property Tax Refunds (PTR) are intended to decrease the tax burden on seniors, people with disabilities, and low to moderate income earners. The PTRs are referred to as Circuit Breakers when they apply to homeowners and Renters Credits for renters. After accounting for these returns, the effective tax rates ranged from 4.2% for the first decile to 1.3% for the top decile. In fact, these returns help make the overall tax system in Minnesota less regressive; they decrease the Suits index from -.075 to -.053.

So who benefits from the PTR? The Minnesota Budget Project points out that in 2007, nearly 600,000 households benefited from the returns. Slightly under half of the beneficiaries were renters and the rest were homeowners. Seniors and people with disabilities made up a significant percentage of those who received both the Circuit Breaker and Renters Credit, 38% and 28% respectively.

Property taxes place a disproportionate burden on low to moderate income households in Minnesota, but the Property Tax Refunds help to lighten the load.

Interactive: The Chopping Block

Yet another budget "game," this time on the Federal expenditure level:

http://www.americanprogress.org/issues/2011/02/budget.html

Special Service Districts

As John’s post below shows, “Special taxing districts” are some of the fastest growing levy increases in recent years. Much of this is a response from local government to deal with increased demand for public services, deteriorated infrastructure, and plans for economic development, transportation, and safety. Much is also due to the ability for cities to utilize unique MN laws that allow for the creation of independent governmental units for defined areas “within the city where special services are rendered and the costs of the special services are paid from revenues collected from service charges imposed within that area.” (MN Statute 428(A)) These districts provide special services that are typically not provided by general-purpose governments (*note: these are different from special school district levies/taxes)

Local examples abound: the Metropolitan Mosquito Control District, Metropolitan Council (with 10% of its funding through property taxes), and recently examples of hyper-local Special Services District (SSDs) like the Minneapolis Downtown Improvement District (DID), which actually collects taxes and runs the district as a separate nonprofit organization - with its own private vendors, contractors, staff, and processes. See DID map at http://assets.ngin.com/attachments/document/0015/1407/Zone_8.5x11.pdf.

In SSDs, a defined geographic area is assessed additional property taxes for services of their choosing – from entire neighborhoods to commercial corridors, to even specific street intersections. (the example below is the Riverview Theater intersection)

Minneapolis has 16 current districts in many neighborhoods. Many new areas (including Cedar Riverside) are looking to implement a variation of a SSD for capital improvements, safety zoning, marketing, and “clean and green” initiatives.

Next time you travel through the Hennepin-Lake-Lagoon Ave area of Uptown Mpls, or Downtown, look around – you’ll notice that there isn’t snow blocking sidewalks or parking meters, abundant bicycle parking loops and pedestrian benches are installed and clean, and there may be a nice string of lights through the trees, shrubs, and distinctive lights on the boulevard. These things were paid by property owners in the area as additional property tax, as these are all over-and-above what the city normally provides for a streetscape and maintenance.

Property owners in current SSDs generally favor the enhancements and additional services because they can see directly what their money pays for - although the business owner usually pays for the tax indirectly through the lease agreement. As budgets for local government services dwindle and increased public-private partnerships become necessary, could this model be used to provide common services (that government ordinarily would provide) through more tangible fee-for-service taxes?

Decreasing Increases in Property Taxes

It’s no secret property taxes have been going up. After the cuts in recent years to state-funded LGA (Local Government Aid), property taxes have risen by 3.2% in 2010, 5.6% in 2009 and an average of 6.9% for years 2008-2010. The Minnesota Department of Revenue estimates that for every $1 cut in aid, property taxes increase by 67 cents. As shown below, the biggest increases have been levied by the special taxing districts.

(Source: MN Dept of Revenue)

So my question is if property taxes have increased an average of 6.9% per year between 2008-2010 but only 3.2% in 2010, what has made the increases decrease? Did Governor Pawlenty substantially increase LGA in the final years of his term? Not quite. In 2008 a state law was passed putting a cap on increases in property taxes. The legal limit is the lower of a)inflation or b)3.5%. Last year (2010) it was calculated by inflation: 0.8%. Special levies for debt, public safety and certain other costs are not subject to the cap. (Source: MN Dept of Revenue) So property tax increases are shrinking but last year’s 3.2% is obviously well over the .8% cap. How can this be? This is because any jurisdiction over 500 residents exceeding the cap must hold a Truth-in-Taxation hearing where residents have greater input over the proposed budgets. For example, in 2010 the overall statewide city portion of property taxes was initially proposed with a 5.4% increase but the final increase was only 4%. (Source: League of Minnesota Cities) One would have to assume the Cap and the Truth-in-Taxation hearings have had an impact. Is this law a good thing? I’m sure local government leaders don’t like them as they are under more public pressure. So in short, the state has cut aid to local governments while restricting their ability to make up the difference. Perhaps with Governor Dayton in office whose newly released budget proposal makes no further cuts in LGA, the need to raise property taxes will diminish; or will it considering the budget must clear a Republican house and senate?

Buy vs. Rent

Here is an interesting interactive map that describes which cities have a home price structure that is more favorable to renters or homeowners. I thought it was applicable for our conversation about the incentives that people have to own a home. Just click on the image.

State Budget Primer Video

Whiteboard video primer on the state budget from TPT and Commissioner Schowalter. Click here.

Property Tax Assessment

In class we discussed the process of assessing property tax and more specifically the assessment methods and quality of assessment. Assessment can be costly to a government agency which is why many do property assessment annually or biannually, such as Minneapolis. According to state law, the value and classification of real estate are established as of January 2 and December 1 each year for Minnesota.

What, you may ask, are the conditions they assess? Some discussion around assessors examining only the exterior and not considering the interior of a home came about during class. According to the City of Minneapolis "assessor's base the estimate of market value on the characteristics of the property that affect market value such as size, age, condition, and basement finish, as well as special features like fireplaces, extra baths, walkout and other factors." The assessed market value is then compared to market sales "to assure property values are fair and equitable." Property classification such as commercial, apartment, farm, homestead are also considered with market value in property tax assessment. Do you live in Minneapolis? Curious about your estimated property tax? The City provides a Property Tax Estimator.

After an assessor has come to your home the assessor mails a value notice by the end of March each year indicating the value and classification of your home for property taxes you will pay the following year. Did you know that if you disagree with your value notice you can call the appraiser and discuss your concerns? If even after your discussion with the appraiser you feel that your assessment is incorrect you can appeal your assessment.

How many people do you think actually go through this process to be sure their property is assessed fairly?

State Budget Crunch Affects Property Taxes

State budget cuts can affect property taxes at the local level. Minnesota's complex system of state aid (known as Local Government Aid, or LGA) is allocated to local governments on a complicated need-based formula, and local governments plan for and budget these funds as revenue sources. In recent years, state legislators and governors have reduced the amount of LGA that is distributed to solve budget problems at the state level; this can create budget problems for local governments, who have planned to receive certified amounts of LGA. (You can see how much cities are certified to receive in 2011 here) .

The Minnesota Department of Revenue has estimated that "every dollar the state cuts in LGA causes a 67 cent increase in local property taxes" . It seems that local governments make up some of the lost revenue by raising property taxes, which makes sense - citizens demand certain services, so it would be very challenging for local governments to completely absorb the LGA cut without some additional revenue.

Today, Governor Dayton released his budget proposal for the next biennium. In his proposal, Governor Dayton proposes no cuts to LGA and other aids to local governments. Since the governor ran on a platform of "tax the rich," it may not be surprising that he proposed a new income tax bracket for the state's top earners. However, there's another interesting element to his proposed changes to the Minnesota tax structure: a statewide property tax on homes valued at more than $1,000,000. Currently, Minnesota has a statewide property tax on business properties and recreational properties like cabins; adding a statewide property tax on homes over $1,000,000 would be a significant change.

A press release from Governor Dayton notes that his "budget represents [his] values and priorities," and also claims that property taxes are "the most regressive and unfair of all state and local taxes." We've talked about considering taxes based on four concepts: efficiency, equity, adequacy, and feasibility. In his press release, Governor Dayton seems to argue that the property tax fails on several of these main criteria. An argument could be made that property taxes may not be efficient or equitable, but that they do score points on the adequacy and feasibility measures. For example, property taxes can raise sufficient revenue, addressing the adequacy measure, and property taxes are currently in place in many local governments and are probably not extremely difficult to administer, addressing the feasibility measure. What do you think?

While increases in the amount of property taxes a homeowner must pay can be attributed to either a rise in tax rates or increases in property values, the abysmal level of home values in this economic climate clearly show that the higher amount of property taxes that Minneapolis homeowners must pay this year are due to an increase in the rate of taxation –a whopping 6.5% increase in property tax rates. Where will most of this tax revenue go? Pension funds, with the largest recipients being the Minneapolis Police Relief Association, the Minneapolis Fire Relief Association and the Minneapolis Employees Retirement Fund. This puts Minneapolis as the second highest for property tax increases in the state, though still behind Rochester, whose residents will see an 8.4% increase this year. The chart below shows the highest city levy increases in Minnesota cities with over 50K population this year:

Our readings for this week mention that many states require truth-in-taxation procedures when there are increases in the amount of property taxes that citizens must pay – whether due to an increase in property values or changes in the tax rates (pg 324). So were Minneapolis residents forewarned or allowed to weigh in about the proposed property tax rates? Yep. The state of Minnesota, through Minnesota’s Truth in Taxation policy, requires that local government entities provide public advertisements on the budget/levy of certain taxing jurisdictions, parcel-specific notices sent to the owner of the property, public hearings and changes in the property tax statement when such increases occur. Here is the truth in taxation bulletin from the City of Minneapolis concerning the increase.

A public hearing was also held in November 2010 in regards to the tax hike, though I couldn’t find any minutes from the meeting. I was however able to find minutes from a Truth-In-Taxation hearing in Nobles County (MN), showing that there weren’t any citizens present at the meeting. I wonder if the Minneapolis hearing was any different.

As a Minneapolis homeowner, I wanted to know which county had the lowest tax rate…turns out that Dakota County has the lowest county property tax rate in the Twin Cities metro area and the state in general. See the chart below for comparisons with other counties in the Twin Cities metro area, and here for information on how it is the lowest in the state. Despite these tax increases, I still value access to public transportation, walkability, the arts, events and city-life too much to "vote with my feet" and leave Minnapolis/Hennepin County...at least for now!