Minneapolis homeowners face a crushing property tax burden that threatens to drive residents out of their homes and potentially out of the city altogether. When even a member of the Board of Estimate and Taxation abandons homeownership due to excessive taxation, we’ve reached a critical tipping point. With property taxes already comprising 48% of city revenue and projected to reach a staggering 57% within six years, Minneapolis stands at a crossroads that demands bold action beyond the tired refrain of ‘just cut spending.’
Steve Brandt’s proposals for alternative revenue sources represent necessary innovation in municipal finance that could rebalance the city’s tax structure while preserving essential services. The status quo is clearly unsustainable – particularly for lower-income homeowners who face the impossible choice between paying escalating tax bills or losing their greatest financial asset.
The False Promise of Budget Cuts Alone
The reflexive call to simply ‘cut spending’ ignores the complex reality of municipal governance. Minneapolis, like most major cities, provides essential services that residents expect and depend upon – public safety, infrastructure maintenance, parks, and community development. When critics demand budget cuts without specifying which services to eliminate, they’re advocating for an approach that lacks both courage and practical application.
Consider the cautionary tale of Kansas City, which implemented severe budget cuts in 2010 to avoid tax increases. The result? Deteriorating roads, reduced trash collection, shuttered community centers, and eventually, a public backlash that forced the city to raise taxes anyway – but only after infrastructure had crumbled and community trust had eroded.
The more sustainable approach is to diversify revenue sources, which provides greater stability during economic downturns while reducing the burden on any single group of taxpayers. This isn’t about growing government – it’s about funding existing obligations through more equitable and stable mechanisms.
Income Tax on High Earners: A Progressive Solution
A city-specific income tax targeting high earners represents the most progressive option among Brandt’s proposals. New York City has successfully implemented such a tax for decades, using a graduated system that places minimal burden on middle and working-class residents while generating substantial revenue from those most able to pay.
Critics will inevitably raise the specter of wealthy residents fleeing to suburban enclaves, but the empirical evidence doesn’t support this fear. A 2020 Stanford study examining the effects of a millionaire tax in California found minimal migration in response to the tax increase. The researchers concluded that place-based factors – quality of life, cultural amenities, and community connections – far outweighed tax considerations in residential decisions.
Minneapolis, with its vibrant cultural scene, renowned restaurants, and urban amenities, offers precisely the quality-of-life factors that retain wealthy residents despite moderate tax increases. Furthermore, implementing such a tax would align the city’s revenue structure with residents’ ability to pay – a fundamental principle of fair taxation.
Real Estate Transfer Tax: Capturing Wealth at the Optimal Moment
The proposed real estate transfer tax represents perhaps the most pragmatic near-term solution. As Brandt correctly notes, this tax captures revenue at precisely the moment when property owners are most liquid – upon selling their property at a profit. Seattle implemented a similar 1.78% tax on real estate sales over $500,000, generating millions for affordable housing while exempting lower-priced properties.
The beauty of this approach is its inherent progressivity – those selling more expensive properties pay proportionally more, while the tax is effectively waived for modest transactions. Moreover, the tax is paid once, at the point of sale, rather than annually burdening homeowners regardless of their current financial situation.
Critics may argue that such a tax could chill the real estate market, but evidence from cities with similar taxes shows minimal impact on overall transaction volume. The San Francisco transfer tax, which ranges from 0.5% to 3% depending on sale price, has coexisted with one of the nation’s most robust real estate markets for decades.
Voluntary Payments from Tax-Exempt Institutions: Fairness in Service Utilization
The proposal to secure voluntary payments from large tax-exempt institutions addresses a fundamental inequity in the current system. Major non-profits like hospitals and universities consume substantial city services – police protection, fire services, road maintenance – without contributing to the tax base that funds them.
Boston’s PILOT (Payment in Lieu of Taxes) program has successfully implemented this approach, securing millions in voluntary contributions from institutions like Harvard and Massachusetts General Hospital. The public accountability component – publishing which institutions contribute and which don’t – provides a powerful incentive for participation without requiring legislative approval.
Yale University contributes over $12 million annually to New Haven, Connecticut through such a program, recognizing its obligation to support the city infrastructure its students, faculty and staff utilize daily. Minneapolis institutions like the University of Minnesota and major healthcare systems could similarly acknowledge their civic responsibility through proportional contributions.
Addressing the Counterarguments
The primary counterargument to these proposals centers on concerns about driving businesses and wealthy residents from the city. This argument warrants serious consideration but ultimately falls short when examined against empirical evidence.
Studies of municipal tax policies consistently show that quality of life factors, business ecosystem, and workforce availability far outweigh moderate tax differences in location decisions. When Minneapolis-based Target Corporation considered relocating its headquarters in 2015, the company ultimately remained in Minneapolis despite tax incentives from other jurisdictions, citing the city’s talent pool and quality of life as decisive factors.
Another legitimate concern involves the legislative hurdles these proposals face. Most would indeed require state approval in Minnesota’s system. However, this challenge speaks to the need for coalition-building and advocacy rather than abandonment of these ideas. Minneapolis leaders should be building alliances with other Minnesota cities facing similar challenges to present a unified front at the legislature.
The Path Forward
Minneapolis stands at a pivotal moment where maintaining the status quo means continuing to burden homeowners with unsustainable tax increases. The city needs a three-pronged approach: thoughtful examination of spending efficiencies, diversification of revenue sources, and coalition-building to secure necessary legislative changes.
The property tax crisis in Minneapolis isn’t just a fiscal issue – it’s fundamentally about who can afford to remain in the city and who gets pushed out. Without action, Minneapolis risks becoming a city where homeownership is increasingly limited to the wealthy, undermining decades of work building diverse, stable neighborhoods.
Brandt’s proposals offer a starting point for necessary innovation in municipal finance. The question isn’t whether Minneapolis can afford to implement these changes – it’s whether the city can afford not to.
