Why the cabin tax should be considered for the chopping block in 2016

By McGhiever (Own work) [CC BY-SA 2.5 (http://creativecommons.org/licenses/by-sa/2.5)], via Wikimedia Commons

By McGhiever (Own work) [CC BY-SA 2.5 (http://creativecommons.org/licenses/by-sa/2.5)], via Wikimedia Commons

With the state of Minnesota having a projected surplus of $1.871 billion this year and the entire legislature up for election in November, both sides are currently looking for ways to appeal to voters. This will mostly likely consist of Democrats offering spending, specifically focusing on the universal pre-K, which would make pre-kindergarten education universal as a part of the public school system, debate once again. Republicans will likely offer transportation spending, which has been a struggle for the legislature to agree upon, and tax cuts. One specific Republican proposal is a reduction to Minnesota’s cabin tax. The tax on recreation property was first created in 2002 under Governor Jesse Ventura when the state was dealing with a large deficit.

From a political standpoint, the cabin tax makes perfect sense. While many people in Minnesota have cabins, it is definitely not a majority who do. Moreover, although many Minnesotans have cabins, their cabins may be in Wisconsin or Ontario. Additionally, many cabin owners in Minnesota are from surrounding states, so they are unable to vote candidates in or out of office in Minnesota.

Normally, property taxes are exclusively a local-level tax. It is typically understood that the tax goes to pay for the perks that the local government provides to the property and its owner, like fire and police services. However, the cabin tax goes directly to the state general fund, meaning that it goes to light rail projects and MNsure instead of the fire department that services the cabin itself. This breaks with the very principles of property taxes.

In a Star Tribune article, Democratic representative Paul Marquart from Dilworth said that the Republican proposal was weird because it did not include any property tax relief for homeowners. The reason that there is no property tax reduction is because there are no residential property taxes at the state level, so there are no rates for the Republicans to lower. One would think that a state legislator and the Democratic leader of the House Tax Committee would know that. If Marquart is referring to increasing Local Government Aid (LGA), he should realize that LGA has never led to a statewide decrease in property taxes, as local governments are incentivized to use the money for other spending and hold property taxes or increase them.

Other Democrat legislators have argued that the Republican plan will turn into a tax break for wealthy people who own two houses, which completely ignores reality. Most cabins in Minnesota are owned by middle class families and have been passed down and split up over generations, making for a common “family cabin.” The Minnesota Lakes & Rivers Advocates found in 2005 that the average seasonal property owner household income was $58,383, which showed a slight decrease from 1999. Additionally, the tax on cabins will eventually price lower-income individuals out of owning a cabin, meaning that owning a cabin will become accessible only to wealthier individuals. So no, Democrats; cabins are not universally owned by wealthy people. With this tax however, the outcome of cabins being only a possibility for the wealthy is more likely.

The regular 2016 legislative session is bound to have many groups asking for different spending or tax cuts, all stemming from the argument that Minnesota has plenty of money to spend. If the state does everything proposed, it will find itself in a large deficit. With that said, the cabin tax is certainly a tax that should be carefully considered for repeal.