[Mpls] Property Tax: Progressive or Regressive?

[Carol Becker]

Mark Anderson wrote:



> Carol Becker wrote:
> <snip>  The property tax in practice is strongly regressive; there little 
> to no link between taxation
> and wealth, the incentives in the system are not what you want to create a
> healthy community, etc.  Not a good way to go.



Mark Anderson replies:
> That is an interesting supposition.  It certainly is counter to everything
> I've seen.  Do you have any evidence of the tiny link between (property)
> taxation and wealth?  I've always thought real property values to be a
> pretty good proxy for wealth (or better than anything else we have, at
> least).  That's why I think property taxes make more sense than income
> taxes, which are a disincentive to work.



Carol Becker replies:



Ah, the joys of being misquoted.  This quote comes from a discussion of the 
Pittsburgh tax system, which is strongly oriented towards taxing land much 
more heavily than property.  This has resulted in a strongly regressive tax 
system in Pittsburgh.



Are Minnesota property taxes progressive or regressive? In Minnesota, the 
true tax geeks turn to the "Minnesota Tax Incidence Study" (see link below) 
to get answers on this question.   If you have this report, look at the 
chart on page 32 that shows the major taxes in the state.  This chart 
divides all the people in the state into ten groups by income (poorest to 
richest) and shows the percentage of their income each group pays in various 
taxes.  What you will see is that of the four biggest state tax revenues, 
three of them are regressive (business, sales and property).  This means the 
poor pay a larger portion of their income than the rich.  The only 
progressive major state tax is the income tax.



To give you a sense of the regressiveness of the property tax in Minnesota, 
for 2002, the amount of their total income that people paid in property tax 
(when you group people by income into 10 equal sized groups)



- 2.2 percent for the second decile (the 10% to 20% poorest Minnesotans)

- 1.8 percent for the fourth decile and 1.9 percent in the sixth decile (the 
people right in the middle for income - between 40% and 70% in income)

- 1.0 percent in the tenth decile (the richest 10% of Minnesotans).



In short, the poor pay more.  The rich pay less.



Link to the Tax Incidence Study:



http://www.taxes.state.mn.us/legal_policy/other_supporting_content/05_incidence_report.pdf



Carol Becker

Longfellow

Future Member, Board of Estimate and Taxation

Still a Geek