Working Papers
PDF | Free | 56 pages
Download PDF

What Drives the Property Tax?

A Holistic Examination of City and County Budgets in Minnesota

Aaron Twait and Mark Haveman

March 2009, English

Property tax levy increases are a policy concern for state and local governments

nationally. It is conceptually appealing to examine state-level aggregate data to discern trends and explanations for increases. However, aggregate level can distort what is actually happening in the unique budgeting context of individual local governments. The difficulty of reasonably assigning responsibility for property tax increases to the independent but interconnected part of the system adds to the confusion. This research explores these issues, looking at budget materials for two counties and six cities in Minnesota over a five-year period. We confirm that cities and counties responded very

differently to state aid cuts. We find that changes in property valuation had significant impacts for how new property tax levies were distributed in urban areas. We also find that spending increases have largely been driven by health care and retirement costs, and mandated spending in the case of counties. We conclude that an understanding of the root causes of property tax increases remains far beyond the capacity of most citizens, absent a desire by local government officials to foster it.


Local Government, Property Taxation, Public Finance, Tax Reform, Taxation