Rep. Paul Marquart - County Option Revenue Reform Initiative

County Option Revenue Reform Initiative

Representative Paul Marquart Monday, March 23, 2009

Highlights of County Option Revenue Reform Initiative 2

• Gives counties a new option to raise revenue to protect

property taxpayers, save jobs, and provide essential services. • Helps solve the state’s budget problems into the future. • Provides counties with a more stable source of revenue than state

funded County Program Aid. • Reforms and strengthens the state and local fiscal relationship. • Moves toward elimination of inequities caused by individual city local

sales taxes.

Property Tax Burdens are Increasing 3


In 2010, the property tax is projected to surpass the income tax

as the number one revenue source in Minnesota for the first time in over a decade.
Under the Governor’s proposal, local property taxes will increase

$626 million over the next three years.
Since 2002 property taxes have increased 67 % ( $3.1 billion)

statewide and 86 % on homeowners.
Under this initiative, roughly 50 % of new revenues would go to

eliminate the property tax increases that would occur under the Governor’s proposal.

The share of Property Taxes have increased substantially between 2004 and 2010, while Sales Taxes have decreased.

2004

Sales 28.2 %

Income 38.0 %

2010

Income

Sales 24.0%

Property Sales Property 33.8 %

Price of Government Report

Property 38.7%

Income 37.3%

Income Property Sales

County Option Revenue Reform Details 5


The reform initiative gives all counties the option of imposing a

1/2 cent sales tax, subject to a reverse referendum, rather than raising property taxes to recoup cuts in state aid proposed by the Governor.
Counties choosing this revenue option would retain a portion of

state County Program Aid.
Aid payments are adjusted to equalize for varying sales tax

capacity between the counties.

Why Local Control? 6

Sales tax rates of more than 6 ½ % already exists in 23 cities and cover more than 1/3 of the state’s population. 57 % of all taxable sales in Minnesota are subject to a local sales tax. The initiative reduces the revenue inequities caused by the patchwork of local option sales taxes imposed by cities across the state. Under the proposal, counties that impose the sales tax would take over the obligations funded by the city sales tax. The city-level tax would be eliminated. Helps property owners stay in their homes in tough economic times. Taxpayers have more control over the level of sales tax they pay than the property tax.

The Reform Protects Property Tax Payers, Jobs, and Local Government Aid 7

Reduces cuts to Local Government Aid. Estimated to save up to 1,500 jobs across the state. Essential services are protected. Keeps property tax increases in check. Realizes long term state budget savings of at least $ 100 million per year.

Fillmore County Example 8
Governor’s Proposal for 2010




2009 Fillmore County Base CPA Fillmore County share of Governor’s proposed cut Total Fillmore County CPA under Governor

$ 1,081,00 - $ 355,000 $ 726,000


Reform Proposal for 2010




If Fillmore County imposes a ½ cent sales tax CPA revenue after sales tax equalization reduction Total County Revenues under Reform plan

$ 601,000 + $ 794,000 $ 1,395,000


In 2010, Fillmore County could gain $669,000 more than under the

Governor’s proposal. More than 50% of the revenue, or $355,000, would go to eliminate the property tax increases that might otherwise occur because of the Governor’s proposed aid cuts. The remaining new revenue would go toward funding essential services.

Hennepin County Example 9
Governor’s Proposal for 2010




2009 Hennepin County Base CPA $ 33 million Hennepin County share of Governor’s proposed cut - $ 27 million Total Hennepin County CPA under Governor $ 6 million


Reform Proposal for 2010




If Hennepin County imposes a ½ cent sales tax CPA revenue after sales tax equalization reduction Total County Revenues under Reform plan

$ 63 million + $ 0 million $ 63 million


In 2010, Hennepin County could gain $57 million more than under the

Governor’s proposal. $27 million of that would go to eliminate property tax increases that might otherwise occur because of the Governor’s proposed aid cuts. The remaining new revenue would go toward funding essential services.