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Old 01-09-2015, 11:32 AM
 
Location: Mound, MN
267 posts, read 441,014 times
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Part of the problem with your goal of more progressive taxes at the state level is that they rely on income tax which rise and fall dramatically with the economy whereas sales & property taxes give a more consistent revenue source. As the economy falls so does income tax revenue which is the wrong time to then try and increase taxes to keep revenue coming in. You can see this quite clearly in a state like Minnesota where we go through large positive and negative revenue gaps because of our reliance on income taxes. Economy has been good lately so we have a $1b+ surplus.
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Old 01-09-2015, 11:48 AM
 
750 posts, read 732,878 times
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Quote:
Originally Posted by BillWallace View Post
Part of the problem with your goal of more progressive taxes at the state level is that they rely on income tax which rise and fall dramatically with the economy whereas sales & property taxes give a more consistent revenue source. As the economy falls so does income tax revenue which is the wrong time to then try and increase taxes to keep revenue coming in. You can see this quite clearly in a state like Minnesota where we go through large positive and negative revenue gaps because of our reliance on income taxes. Economy has been good lately so we have a $1b+ surplus.
Yes, it may be a problem, but something that needs to be addressed rather than something that seriously argues about reversing a regressive tax situation. In other words, I don't think the argument that 'well, we need to keep the tax system regressive because it's more stable' really flies.
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Old 01-09-2015, 03:11 PM
 
464 posts, read 628,887 times
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Quote:
Originally Posted by BillWallace View Post
Part of the problem with your goal of more progressive taxes at the state level is that they rely on income tax which rise and fall dramatically with the economy whereas sales & property taxes give a more consistent revenue source. As the economy falls so does income tax revenue which is the wrong time to then try and increase taxes to keep revenue coming in. You can see this quite clearly in a state like Minnesota where we go through large positive and negative revenue gaps because of our reliance on income taxes. Economy has been good lately so we have a $1b+ surplus.
Property taxes take a hit when the economy worsens too, though, as property values decline. So do sales taxes if the overall level of spending declines.

Plus, a diversified economy, which Minnesota is fortunate to have, goes a long ways towards mitigating the impacts of economic downturns and reducing volatility -- the state certainly was affected by this last one, but not nearly as badly as some places. We may not have the booms that other places do, but we don't have the busts either.
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Old 01-09-2015, 03:59 PM
 
687 posts, read 1,020,540 times
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Originally Posted by QuietBlue View Post
Property taxes take a hit when the economy worsens too, though, as property values decline.
This is false. Property tax works on a levy system. If all real estate is reduced in value by 10%, everyone still pays the same property tax.

Imagine a city with 2 properties. Property A has a value of $100. Property B has a value of $300. The city sets their property tax levy at $20. Property A is 1/4 of the value of all property in the city so the property tax for property A is $5. Property B pays the remaining $15.

Suppose the next year housing values are cut in half. Then Property A is valued at $50 and Property B is valued at $150. Property A is still 1/4 of the value of all property in the city so the property tax for Property A is still $5 assuming the city keeps its levy at $20.

What would change the amount of property tax payed by Property A would be a change in the relative value of the properties. Suppose that Property A maintained its original value of $100, but Property B's value fell to $150. Now, Property A is 40% of the value of the property in the city. So, the property tax for Property A would be $8 and the property tax for Property B would be $12.
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Old 01-10-2015, 09:56 AM
 
Location: Mound, MN
267 posts, read 441,014 times
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Northsub is right - while your appraised value goes down the city/county just raise the levy rate to bring in the same or more money each time. What really matters more is how your appraised value is moving compared to other properties. Ideally you want your value to decrease more in bad times or at a slower increase than your neighbors during rising home prices.
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Old 01-11-2015, 12:52 AM
 
1,816 posts, read 2,490,911 times
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Originally Posted by BillWallace View Post
Part of the problem with your goal of more progressive taxes at the state level is that they rely on income tax which rise and fall dramatically with the economy whereas sales & property taxes give a more consistent revenue source. As the economy falls so does income tax revenue which is the wrong time to then try and increase taxes to keep revenue coming in. You can see this quite clearly in a state like Minnesota where we go through large positive and negative revenue gaps because of our reliance on income taxes. Economy has been good lately so we have a $1b+ surplus.
Are we really more volatile than other states? I thought I read that Minnesota has a fairly balanced tax system that tried to levy taxes across a variety of platforms, namely, sales tax, income tax, and property taxes.

Part of the volatility in the past decade and a half has been poor planning - when we've had surpluses, we didn't put anything away in a rainy-day fund.

Quote:
Originally Posted by northsub View Post
This is false. Property tax works on a levy system. If all real estate is reduced in value by 10%, everyone still pays the same property tax.

Imagine a city with 2 properties. Property A has a value of $100. Property B has a value of $300. The city sets their property tax levy at $20. Property A is 1/4 of the value of all property in the city so the property tax for property A is $5. Property B pays the remaining $15.

Suppose the next year housing values are cut in half. Then Property A is valued at $50 and Property B is valued at $150. Property A is still 1/4 of the value of all property in the city so the property tax for Property A is still $5 assuming the city keeps its levy at $20.

What would change the amount of property tax payed by Property A would be a change in the relative value of the properties. Suppose that Property A maintained its original value of $100, but Property B's value fell to $150. Now, Property A is 40% of the value of the property in the city. So, the property tax for Property A would be $8 and the property tax for Property B would be $12.
You're definitely right in this. But this rarely reflects reality - the downturn in property values hits different areas harder. During the recession, you saw a lot of middle-class neighborhoods as well as a some higher-income ones hit with increasing property taxes because other parts of the city--such as North Minneapolis--were facing a foreclosure crisis. They generally saw relief because of plummeting values (little comfort, of course, when your most valuable asset is now worth less than you owe) and will be in for some hurt should the area recover (property taxes will almost certainly jump sharply).
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Old 01-11-2015, 11:14 AM
 
687 posts, read 1,020,540 times
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Originally Posted by xandrex View Post

You're definitely right in this. But this rarely reflects reality - the downturn in property values hits different areas harder. During the recession, you saw a lot of middle-class neighborhoods as well as a some higher-income ones hit with increasing property taxes because other parts of the city--such as North Minneapolis--were facing a foreclosure crisis. They generally saw relief because of plummeting values (little comfort, of course, when your most valuable asset is now worth less than you owe) and will be in for some hurt should the area recover (property taxes will almost certainly jump sharply).
I can't figure out what point you are trying to make here. One confusing point is I don't know who the bold "they" is referring to. Middle-class neighborhoods, higher-income neighborhoods, other parts of the city, North Minneapolis? I'm also not sure about the bold But. I don't see how any of what you said is in any way contrary to the notion that revenue from property tax is independent of property values.
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Old 01-12-2015, 04:03 AM
 
Location: MPLS
752 posts, read 427,759 times
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Quote:
Originally Posted by xandrex View Post
"Are we really more volatile than other states? I thought I read that Minnesota has a fairly balanced tax system that tried to levy taxes across a variety of platforms, namely, sales tax, income tax, and property taxes."
According to this estimate (Pew Trusts), our tax revenue was the 19th most volatile between 1995 and 2013. As I've read elsewhere, revenue stemming from extraction industries (minerals and petroleum) was determined to be the most erratic, followed, in descending order, by corporate income, personal income, and sales. In states with a sizable contingent of large firms (Minnesota), corporate income taxes were almost always the most volatile. Here's another chart (also from Pew), this one measuring the fluctuation in (real) state revenue between 2006 and 2014. Compare Tennessee, Arkansas, and Washington (high sales tax) with New Hampshire, Delaware, and Oregon (no sales tax). My takeaway is that the sales tax, while regressive, is a necessary component of a steady revenue stream.
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Old 01-12-2015, 03:59 PM
 
1,816 posts, read 2,490,911 times
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Originally Posted by northsub View Post
I can't figure out what point you are trying to make here. One confusing point is I don't know who the bold "they" is referring to. Middle-class neighborhoods, higher-income neighborhoods, other parts of the city, North Minneapolis? I'm also not sure about the bold But. I don't see how any of what you said is in any way contrary to the notion that revenue from property tax is independent of property values.
I feel you're more picking at my argument in a strange way than being too unsure of what I mean. In which case, pick away.

"They" is referring to the sentence immediately preceding it (in this case, North Minneapolis).

The "but" is agreeing with you in theory, but when has the property values of any city all fallen at the same rate? Plummets like we had during the recession battered everyone, but particularly poor communities that were hit with a foreclosure crisis (which temporarily provides them tax relief while straining middle- and upper-class neighborhoods to shoulder the burden). That's all I was trying to point out.
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Old 01-13-2015, 05:39 PM
 
687 posts, read 1,020,540 times
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Originally Posted by xandrex View Post
I feel you're more picking at my argument in a strange way than being too unsure of what I mean. In which case, pick away.

"They" is referring to the sentence immediately preceding it (in this case, North Minneapolis).

The "but" is agreeing with you in theory, but when has the property values of any city all fallen at the same rate? Plummets like we had during the recession battered everyone, but particularly poor communities that were hit with a foreclosure crisis (which temporarily provides them tax relief while straining middle- and upper-class neighborhoods to shoulder the burden). That's all I was trying to point out.
I'm still confused. It still sounds to me like you are trying to refute a claim that property tax provides a consistent revenue stream for a city with an argument about possibly changing property tax values for individual tax payers. I feel like I am missing something, or maybe I wasn't the person you intended to address the "but" to?
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