Input sought for tax process
FAIRMONT– By now residents of Martin County will have received information on their proposed property taxes for 2023. The timing of this delivery coincides with upcoming Truth in Taxation meetings that will take place for the county, cities and school districts.
County Assessor Mike Sheplee said that Truth in Taxation provides time for taxpayers to provide feedback to the different boards and councils that make decisions on spending.
Following Truth in Taxation hearings, the different entities will officially approve their budgets and levies for 2023 so they’re seeking the input of the taxpayers as part of the process.
“The councils, school boards and (county) commissioners have to decide what it takes to run their district, county or city. Part of that spending is levied out to property. Some of their spending is covered by aids, savings or other sales taxes,” Sheplee explained.
Only a portion of the spending is levied through property tax. The county administers the property tax process on behalf of all of those entities.
“We don’t make spending decisions. We just administer the laws and present the results to the taxpayers,” Sheplee said.
In everyone’s tax estimate, there’s the actual amount they paid in taxes in 2022, as well as the amount proposed for 2023. There’s also a breakdown of how much will go to the county, the city or township they reside in and the school district they live in.
“Included in the tax estimate is a percent change calculated. That gets people talking… this year those percent changes were very large. One of the questions is why has that happened,” Sheplee said.
There are four big reasons that would lead to an increase. They are estimated market value, tax shift, Homestead Market Value Exclusion and a class rate tier change.
Sheplee explained that when a class of property changes significantly differently from other classes, a tax shift can occur. The last significant tax shifts in this area was the residential real estate bust of 2008 and the ag land valuation run up in 2012.
“This year, residential increased significantly more, at a much higher rate than the other classes,” Sheplee said.
Residential increased county-wide 25 percent and in the city of Fairmont 23 percent, while commercial and industrial increased 2 percent and ag 10 percent.
Sheplee said a frustrating part of the process is that when they put a value on a property in January of this year, the data used in sales ratio studies was from 2020 and 2021.
“Now here we are at the end of 2022. We had a really strong market back there two years ago and today it really seems to be softening. Housing markets today aren’t what they were two years ago,” Sheplee said.
However, that’s just how the state-wide process works and always has worked.
Another reason for big increases is due to the fact that the Homestead Market Value Exclusion is a very dated statute and was done at a time when $76,000 represented an average home. Now, it’s about four times that amount.
The excluded value is at its peak when a house value is at $76,000 and $30,400 is not taxed. As the market value increases, the excluded value goes down to zero when the value of a home is at $413,800.
“If your home’s value increased last year to this year, you’re getting taxed on more value because you’re losing the benefit of the exclusion,” Sheplee said.
The third reason behind possible increases is due to the residential class rate tier. There’s a 1 percent class rate on the first $500,000 of value but it jumps up to 1.25 percent for every dollar over that.
Those whose home value jumped from $400,000 to $600,000, might see all four factors at play.
While some may find their estimates frustrating and overwhelming, property owners don’t just have to accept it as there are a number of actions that can be taken.
First, people should make sure to have applied for homestead. There are also special homesteads for disabled veterans and for the blind and disabled.
“The property tax refund is the huge one,” Sheplee said.
There are two Minnesota Homestead Credit Refunds. There is a regular one, based on income and property taxes, and a special, which is not income-based but based on how much the property tax increased (greater than 12 percent).
The program is run by the Minnesota Department of Revenue and people need to apply by Aug. 1, 2023. Historically, Sheplee said a lot of it goes unclaimed because a lot of people don’t know about it or file for it.
All of the property tax estimates are on Beacon so if someone hasn’t received theirs yet or wants to check on a different property, they can find the amounts on that website as it’s public information.
Additionally, Truth in Taxation is the time to ask about tax estimates and allows residents the opportunity to question how the funds will be spent.
The Truth in Taxation hearing for Martin County is at 6 p.m. on Thursday, Dec. 8. It’s at 6 p.m. on Monday, Dec. 12 for the city of Fairmont and at 6 p.m. on Tuesday, Dec. 13 for the Fairmont Area School District.