BY STEVE BRANDT
I was pleased to see Cam Gordon’s column in the December issue of Southside Pride, and its focus on the potential advantages that an income-based tax might bring to Minneapolis city finances.
As an elected member of the Minneapolis Board of Estimate and Taxation, I’ve been advocating since last summer for a serious and sustained examination of the city’s alternatives to continued reliance on the regressive property tax as the chief tax-based source of city funding. In fact, I voted for the mayor’s proposed 8.1 percent property tax proposal solely because he and the council president pledged such a review.
Fortunately, the council was able to cut his 2025 levy increase to below 7 percent, but that’s still a hardship, especially for those on low or fixed incomes. That’s especially so with a projected 9 percent property tax increase on the horizon for 2026. Some Minneapolitans simply can’t afford such increases without severe sacrifices.
The plain truth is that property taxes are the only major discretionary tax available to the mayor and council. The city sales tax and the special taxes we pay on such items as restaurant meals and liquor are at a percentage set by state law. Those collections are only now recovering from a severe dip during the pandemic.
The property tax burden on homeowners this year is worsened by the shift in tax base. Home values in the city dropped less than apartment and commercial property values so those who own homes pay a bigger slice of the tax pie.
As Gordon noted, there are several potential new taxes based on income: a wealth tax, which would be trickiest to implement, a payroll tax on workers, or a straight income tax, which could prove the simplest to administer as an add-on to the state’s income tax calculation. My preference is to explore a modest income tax but only on higher-earner households. Setting the starting point for such a tax is open for debate. The city’s median household income still is below $100,000. Should a city income tax kick in at twice that level? Three times?
Those questions should be shaped by public input. Thorough research is needed into the multiple cities and counties that levy an income tax in both red and blue states. Do wealthier residents flee such a tax? If so, are they replaced by other well-off residents? How much money would such a tax collect? How should it be used?
My rough calculation is that a 1 percent city income tax on higher earners could raise tens of millions of dollars. One purpose could be both to provide some property tax relief to those already heavily burdened and to shift from regressive property taxes to progressive income taxation as the shock absorber for inevitable inflationary increases in the city budget. Or such a tax could pay for a list of new desired city services.
A number of people have reacted to this idea by urging first that city spending be cut or at least moderated. As a member of the Board of Estimate, I have only two powers: to vote on the maximum property tax increase set for the council to live within, and to authorize city borrowing for infrastructure projects. The council and mayor determine how much the city spends and for what it is used. Major factors influencing spending include inflation in items consumed by the city, such as asphalt and gasoline, by labor contract increases and – to a much smaller degree – by choices the council makes to add discretionary programs, as we saw with the 2025 budget. I tell people who call for city spending moderation to contact their council member. Enough of them did so to reduce the property tax increase from the mayor’s proposed 8.1 percent to the council’s 6.8 percent.
But we should also look for opportunities for further savings, perhaps following the example of a group of St. Paul residents who recently examined that city’s budget in detail. A citizen budget commission might be able to identify potential savings for further debate.
Meanwhile, the city needs to evaluate its options for raising revenue, determine their political salability at the Legislature, and add the best option to its legislative agenda. The new political balance in the House may make the job tougher for the next two years. But it’s time to lay the groundwork, especially with such influential lawmakers as Rep. Aisha Gomez, who represents me and many other Southsiders, and who will be the ranking House DFLer on the tax committee.
The alternative is ever more property tax pain.
