Property tax hikes show the problems of wealth taxation
Households across Minnesota are being hit with notifications that their property taxes will go up because the value of their property has gone up. To give just one example, the Alexandria Echo Press reports that:
Douglas County residents who received their Truth in Taxation notices in the mail recently may have done a double take, thinking taxes can’t be that high.
But the truth is, taxes for many residents are going up because of a significant increase in property values — 15% to 25% for some residential and seasonal residential recreational properties, according to Douglas County Assessor Stacy Honkomp.
The proposed taxes are based on the current year’s estimated market values, which are set by the county assessor’s office as of Jan. 2, 2022 for taxes payable in 2023.
Here are a couple examples: The value of a seasonal, non-homestead property on Lake Ida increased from $169,700 to $223,700, a 31.8% increase. Property taxes on that land are proposed to increase from $1,616 to $1,942, a 20.1% jump. Meanwhile, the value of a residential homestead parcel just outside Alexandria’s city limits increased from $151,700 to $175,200, a 15.5% spike, and taxes are proposed to increase from $1,293 to $1,420, a 9.8% jump.
Maybe this isn’t so bad if your income went up by 20% or 10% this last year. But for the average Minnesotan, this isn’t the case. What nominal increases in incomes there have been have, on average, been less than inflation — 7.8% in the year to October — so that they have had a pay cut in real terms, a problem which is particularly acute in our state.
Property taxes are levied, as the Echo Press notes, on “the current year’s estimated market values” which may go up or down independently of whether the homeowner’s income has gone up or down. And it is cash, not assets or ‘wealth,’ like the notional value of a house if you sold it, that you need to pay taxes. Yet this is how ‘wealth taxes’ work. Too often we think it is only ‘the rich’ who pay them, property tax assessment season reminds us otherwise.