Tis the season to be jolly -- if you have the kind of warped mind that thinks talking about tax rates is fun. Over the next couple of weeks, various local governments will be holding their so-called "Truth in Taxation" hearings.
They've been busy telling the public how much they will be increasing their tax levies, and the hearings give the public a chance to respond.
I like to be curmudgeonly when it comes to taxes. Not everyone elected or hired to serve in government understands that tax levels make a difference in how well the private economy performs.
To bring up just one recent example, there are reasons that the U.S. economy is doing well at the moment and the jobless rate is low. Conservatives, starting with Ronald Reagan, took away many of the disincentives to work that had been put in place by well-meaning but misguided liberals. In France, on the other hand, the jobless rate is in the neighborhood of 8 to 12 percent, in large part because France has chosen to keep its bloated social welfare system in place. In the Age of Information, investment dollars and jobs are flowing where they are most wanted. It isn't racism that caused the riots in France; it's the lack of opportunities for the poor to raise themselves up.
Thus, it is important to remind public officials that when they increase local property tax levies faster than the rate of inflation, they are hampering the local economy, making this area less likely to attract new jobs.
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Of course, some businesspeople, particularly those with ties to the area, will make keep their businesses here. But if they rely on the local taxpayers as their customers, their businesses will suffer if taxes go up faster than customer's incomes.
So the question then would be, how is Duluth doing? The Citizen's League of Minneapolis came out with a survey last spring which makes it easy for taxpayers to compare their taxation level against other similar cities around the state.
In the survey, Duluth is lumped together with 34 other non-metro communities with populations over 9,000. The survey divides the property tax on a home of average value in each community, by the average market value of that home. That helps give a fairer comparison since property values vary widely around the state.
Now for the good news. Of the 35 cities on the list, Duluthians have the 22nd highest effective property tax rate. An average home in Duluth for the survey's purposes (meaning almost a year ago) was valued at $129,514, the 19th highest valuation in the group. The property tax on that average Duluth home is $1,285.
Even more interesting is that the survey breaks down the components of the property tax. The property tax collects taxes for counties, schools, cities or townships and special taxing districts like the Arrowhead Regional Development Commission.
The Citizen's League found that of the 35 communities in our group, no city has lower property taxes than Duluth. What's more, only two communities, Alexandria and Hibbing, have lower school taxes.
Surprisingly, Duluthians have the fifth highest county tax rate. Sixty-eight percent of that average Duluth property tax bill goes to St. Louis County.
Dennis Fink, the conservative St. Louis County commissioner from Duluth who understands these numbers far better than I do, says that the reason Duluthians pay high county taxes is because property values here are so much higher than they are in the northern part of the county.
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Indeed, the aforementioned Hibbing has the lowest property values in the group. The average home there is worth only $72,127. As a result the average home in Duluth pays $875 in county taxes while the average home in Hibbing pays $446. Only four communities pay lower county taxes than Hibbing in actual dollars, but when the tax bill is taken as a percentage of the home value, Hibbing is the eighth highest.
And Hibbing isn't the worst of it. Fink said a home worth $115,000 in Duluth sells for around $40,000 in Babbitt.
While the county held the line on its property tax levy the past two years, this year it is looking at about a 5 percent increase.
Unfortunately for Duluth, it has the highest special taxing district rate, although in actual dollars it is the smallest component of the overall tax bill. The average homeowner here pays $89 for special taxing districts while in Rochester, a comparable regional center, no dollars go to special taxing districts.
Let's remember, however, that overall we're 22nd highest. Try as I might to be a curmudgeon about taxes, if you go to a Truth in Taxation hearing in the next couple of weeks, go easy on our public servants. Duluth taxpayers are doing a lot better than most outstate communities in our survey group.
Tom West is the editor and publisher of the Budgeteer News. He may be reached by telephone at 723-1207 or by e-mail at twest@duluthbudgeteer.com
