Some more detail about tax proposals

I've been getting quite a bit of feedback from constituents about tax proposals that have been covered in the media. Some of the feedback is outright opposition to anything that increases a government budget--and that's a perfectly legitimate and valid point of view--but I am noticing that there needs to be more clarity about what is actually being proposed and how it affects you and me, so I thought I would provide some background so that constituents can have an accurate picture.

* While the DFL controls both the House and Senate, that doesn't necessarily follow that the two houses are coordinating their proposals for the budget. Indeed, budget proposals are turning out to be pretty different in each body, and they must be reconciled in conference committees before the Governor ever sees these proposals. The Senate is proposing some ideas for taxes that are more expensive than what is going on in the House, and I'm getting a lot of phone calls and e-mail against what the Senate is doing. The Senate has now passed all of its spending and tax bills, but the House has only passed the omnibus transportation bill and a bonding bill. So I haven't even had a chance to vote on the other major spending and tax bills yet.

* The word isn't necessarily getting out that the ONLY income tax increase being proposed in the House would be directed ONLY to property tax relief. The Chair of the House Property Tax Relief Division of the House Tax Committee, Rep. Paul Marquart (DFL-Dilworth) did a nice editorial being carried around the state this week that explains the proposal pretty well. The increase would be a tax rate of 9.00% up from 7.85% for earners making $226,000 as individuals or $400,000 as married couples after deductions. NONE of this proposed increase would go to education, health care, etc. This proposal would cut the average property tax bill for homeowners by 3.4%, while if the legislature adopted the Governor's proposed budget property taxes are expected to rise next year by 7.3%.

* The property tax proposal has been sometime called a more progressive tax. I think that this is misleading people to assume that we will treat the property tax like the income tax. It probably would be more accurate to say that the property tax bill will be "less regressive" rather than "more progressive." Under Rep. Marquart's bill, if you pay more than two percent of your income in property taxes, you would get a credit or refund on your property taxes if your income is less than $150,000. How much? From 25% of your bill if your household income is at $150,000 in income to as much as 90% for people on the lower income scale (especially those seniors on fixed incomes).

* The House proposal would not be sending much property tax relief in the form of local government aid. Indeed, LGA would only be a little more than 10% of the whole package. Most of the relief would go directly to taxpayers.

* The House proposal would prohibit new local sales taxes and local governments would not be able to use your taxpayer dollars to "advertise, promote or hold elections for a referendum related to a local sales tax." This would be good news to folks in Anoka County opposed to the Vikings stadium proposal.

* The only sales tax increase being proposed in the House is an optional half-cent sales tax for transit in the metro area that county boards could opt into. This was part of the transportation package we approved two weeks ago. However, I voted for an amendment that would require a referendum on this proposed sales tax. This amendment failed narrowly. The House might consider at some point a bill for dedicated funding for outdoor habitat, clean water, etc. but that has not moved through committees yet.

* The House is not considering an indexing of the gas tax for inflation, nor are we considering an increase in the business property tax. Those ideas are being proposed at the Senate.

How do the House proposals affect you? Well, I can't tell you exact numbers yet because local taxing authorities like cities, counties, and school districts haven't calculated the household impact of the proposals. But according to staff here, for someone like me--with a house valued in 2006 at $256,700, 2007 property taxes of $2,874, and a 2006 federal adjusted gross household income of $97,976--would see a property tax cut of about $365.79 annually. (Note: On 4/5/07 I double-checked my calculations with House staff and my own tax forms, so the numbers I had posted before Thursday were preliminary.) I would not pay any additional income taxes under the House proposal. I recognize that not everyone in the district fits this profile.

The House property tax bill is HF0003, although I see that it has not yet been updated (or "engrossed" on the House web site at http://www.house.mn).

In addition, if our transportation package passes and more funding goes to city and county roads, our city and county would have to levy less on the property taxes. Finally, the property tax plan includes a "levy buyback" for local school districts that would reduce the amount that the school district levies on our property taxes.

PLEASE send me your thoughtful input about this and other proposals floating out there at rep.paul.gardner@house.mn.