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Lawmakers reconsider cutting property-tax credit

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Some state lawmakers are rethinking the Minnesota Legislature's decision to cut a property-tax credit program, as elected officials from Winona and across the state say the loss of the credits will create property-tax increases regardless of whether cities and counties pass budget cuts.

Two DFL state representatives, Ann Lenczewski and Paul Marquart, proposed a bill this week to reinstate the homestead value market credit, which the Legislature cut in July to help reduce the state's budget deficit. The credit reduced property taxes for homeowners with houses valued at less than $414,000.

To account for the credit loss, the Legislature passed a homestead exclusion that allows owners to pay taxes on a portion of their home's market value. The program will lessen but not offset the impact of cutting the credit.

The homestead credits were introduced in 2002. The state was responsible for reimbursing local governments for the amount of the credits; however, the program was only fully funded in 2002 and 2007, forcing local cities and counties to make up the shortfall, according to a nonpartisan state Senate research group.

Area legislators responded with mixed reactions to the proposal to reinstate the credit.

"I don't think it was a good idea to get rid of the homestead credits, but I'm not sure how to put them back in this budget climate," said Rep. Gene Pelowski, DFL-Winona.

"The credits make it difficult for our cities, counties, and townships to budget when they're not sure how much of a credit they'll receive from the state," said Jeremy Miller, R-Winona. "Everyone seems to agree that in the long run, the homestead exclusion will be better for the budget processes at the state and local level."

Sen. John Howe, R-Red Wing, and Rep. Steve Drazkowski, R-Mazeppa, agreed.

"By changing to an exclusion, the state's trying to be up front with counties and municipalities," said Howe. "When we make decisions on the local level, residents get better results."

"We shouldn't make promises we can't keep with money we don't have, and that's just what reinstating the credits would do," said Drazkowski.

The proposal wouldn't be introduced until the Legislature returns to regular session in January 2012.

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