One of the most common complaints about property taxes is that they function like a wealth tax, where the increase in the notional value of an asset — stocks or bonds in your usual wealth tax proposal, your house in the case of property taxes — can raise your tax burden whether the amount of income you have available to pay the tax has increased or not. This is a pretty fair argument and, as I’ve written before, “any link between increases in assessed property values and increases in property tax payments needs to be broken.”
But that isn’t the whole story. And, when we look at the current round of property tax hikes sweeping Minnesota, it isn’t even a very big part of it.
Around the state
Last week, I wrote about property tax hikes in Ramsey County, Willmar, and St. Louis County. Reasons given for the hikes included “unfunded mandates from the state” and “capital improvements,” but all three cited an increase in staff costs.
Property taxes are also heading upward in St. Paul. Last week, Mayor Melvin Carter proposed a 5.3% property tax levy increase. As Frederick Melo of the Pioneer Press reports, this budget:
…would expand investment in housing programs, such as office-to-housing conversions and down payment assistance, without laying off city employees.
To accomplish those goals, Carter’s proposal would trim hours at some rec centers and freeze hiring for dozens of open city positions.
It should be noted that these measures are intended to fix an affordable housing problem which the city council itself is largely responsible for creating with its disastrous rent control policy.
Either way, this hike is on top of the 9.75% hike proposed by Ramsey County. It is also on top of a 10-year, $37.2 million-per-year levy referendum for St. Paul Public Schools that residents will vote on in November. “That referendum alone would raise property taxes by another $309 for the median St. Paul home,” Melo reports. “Taken together, many property owners could be in for more than $620 in sticker shock.”
In Brooklyn Park, the proposed budget would require a 12.5% property tax levy increase. The Sun Post reports that:
The new central fire station breaking ground later this year accounts for a sizable portion of that total. According to [Finance Director LaTonia] Green, the city would need a roughly 3% increase to pay for the new fire station alone.
Other causes for the proposed budget increase include a 5-7% bump to city staff wages, new health insurance benefits, paid family medical leave and eight new positions throughout the city government. Of those positions, four are full-time firefighters and one is a lobbyist that would advocate for Brooklyn Park’s interests at the state capitol.
According to Green, Brooklyn Park’s median market value only saw a slight increase this year…
Here, again, we see that a significant driver in property tax hikes is the increase in the cost of government employees.
In Cold Spring, KNSI reports:
…residents can expect to see their property taxes increase by approximately 10.5% under the city’s preliminary 2025 budget.
…City Administrator Kris Dockendorf explained to KNSI News what’s behind the increase. “The biggest part of it is the increase in the debt service is mostly due to the construction of our new fire hall.”
The remaining budget increase stems from standard cost-of-living adjustments affecting insurance, employee wages, and general operating expenses across city departments. No single department is driving the increase more than others, with costs spread relatively evenly throughout city operations.
For property owners, this means that even if property values remain unchanged, taxes will increase by the full 10.5%.
In each case, property taxes are going up even if property values aren’t. It isn’t house price rises which are driving these property tax increases, but rises in local government spending. Minnesota’s state government has a spending problem. So do too many of its local governments.
