Thanks for the comprehensive breakdown - this is good food for thought. Question: is it "worth it" to be closer to St Joe's (or whichever is your parish)? Some people wax poetic about being close to their parish (and it's great! we walk 5 minutes from our apartment to ours), but kids aren't the cheapest to raise these days either.
But, then, I would! We told our realtor to only show us houses within 1 mile of Nativity or St. Joe's. That was the one time she got visibly frustrated at us.
We can just let them play after school now and they walk home when they're done. They have a watch, an emergency plan, and know to be home by a certain time. I avoid the daily traffic nightmare of pickup time, and they get hours of outdoor time several days a week with friends (most of whom also live within walking distance), unsupervised by parents, developing that rich anti-fragility Jonathan Haidt's always on about, and often their favorite part of the day.
If our parish were in WSP, but we lived in Eagan, doing that would be at least a lot more complicated.
The daily mileage alone has gotta add up in terms of gas and wear-and-tear, although I haven't done the figures.
Even with WSP's very high residential taxes, I suspect it's a cheaper place to live anyway, in general, because our home values are so much lower than eagan's. Another $100k on a mortgage, is $450-750 a month, depending on interest rates, which more than makes up for anything extra you pay in property taxes. WSP is less affordable than it was, but I *suspect* that (in part thanks to Dakota County's low tax rate) it's still a local leader in affordability.
Asset-based means tests, particularly ones based on real property, can in some ways be worse than income-based tests.
In all cases, of course, policymakers should be careful to ensure that there's never a METR above 100%, though having a plethora of means-tested credits can make the rate get uncomfortably close to that.
The problem with asset-based means tests, though, is that it is much harder for the asset owner to control the value of the asset. At least with income it is generally possible to have some amount of control over how much you make: you can do overtime, seek a better-paying job, or pick up part-time employment after your regular employment. (All of this comes with quality-of-life tradeoffs, though, of course, and there was that case study done by one of the US Federal Reserve branches showing that a single mother of one child in DC ends up, after cash and cash-equivalent benefits, not seeing any substantial difference between making around $10,000 and $60,000 yearly, as I recall.)
But controlling the value of a home, and especially that part of it which comes from the land on which it rests, is often beyond the capability of the homeowner to control. A homeowner can, through no action of their own and with essentially no way to get out of it, see the value of an asset-based benefit (such as the homestead exemption) decrease. This makes it harder for families to manage their budgeting, not knowing what their property tax bill will look like because of the possible loss of that exemption, as you note in the article, which in a time of rising prices and stagnant remuneration is something that should be of significant concern to policymakers.
I will freely admit that I don't know what a good answer to this problem would be. California's notorious Proposition 13 was an attempt, but it has resulted in numerous negative effects and is likely not worth attempting elsewhere. A Singaporean model where the government manages housing stock with an eye both to ensuring adequate housing for a growing population and controlling the rate of appreciation in value of existing housing might be worth considering.
The really interesting property this has, though, is that, precisely because owners have no effective control over their land value, the phase-out creates no meaningful disincentives (that I can think of).
One way to improve the homestead exclusion (I called it an exemption in the article, but I think I need to update that, because it's officially called an exclusion) would be to do what we recommended in "Give The Rich More Money!": instead of phasing it out (which hits the homeowner coming and going), turn it into a flat exemption that applies to everyone, so that everyone gets (say) the first $40,000 of value excluded from their property tax. The size of this exclusion can be computed to be revenue-neutral, and overall tax rates can rise to help compensate for the additional exemptions.
Because, you're right, just as with income-based means testing, the effect of the current exclusion law is to hit homeowners' marginal effective tax rates coming and going. Their bill rises first because their home value has gone up, and then rises a second time because that reduces the percentage of home value excluded.
But I worry that the approach I suggest here would end up being a wealth transfer from the middle class to the rich, which would probably be worse. Property tax (in Minnesota) doesn't have brackets, so there aren't as many tools available to ensure the tax incidence remains neutral along with the revenues. I'd have to do actual math to figure that out.
The analysis in that piece was reliant on the fact that income tax often has brackets, and that you can just introduce more brackets to refine the scale.
But there's no reason property tax can't have brackets. My province doesn't either, but we do have a graduated system (though it's optional*) for electricity billing (the electricity delivery company for most of the province is a Crown corporation monopoly). If your average daily usage for a billing period (you can choose one or two months) exceeds a certain amount, then the electricity used below the total threshold for the period is billed at a given rate, and the use above the threshold incurs a higher rate. (There are also a few fixed charges, like a basic daily fee incurred regardless of use, which I think is used to maintain some slack in the system so that other providers can be reasonably remunerated regardless of whether there was demand for the power they generated. It isn't perfect, but it's probably helped us stave off major problems like what was seen in Texas in recent years with extreme heat and extreme cold leading to grid failures and extremely high bills.) The same rationale could, in principle, apply to land use. It's just, for whatever reason, not done. To make the home owner grant (as we call it here) universal would probably require introducing such, because otherwise it would indeed become a transfer to the rich, which was avoided in the income-tax context by adding brackets.
I should note, however, that depending on what precisely is taxed as far as property goes, the phase-out can create a disincentive. If only the land is taxed, then it generally creates no disincentive. But if the value of the buildings is also taxed (it is here) then it creates a disincentive to improve your house! (Or, at least, it creates a disincentive to improve it going through the proper bureaucratic channels where everything would be on file for the assessors to look at; improving it off the books, as it were, would make the house more valuable without incurring an increased assessment unless the assessors come poking around the neighbourhood, though you would likely be limited in how much you could improve it before you had to apply for appropriate permits.) The landowner can't do much about the value of the land, because that's determined (at least so George argued) by the community around the land, but she can do a great deal about the value of what's on the land. And even then, if George was right about the community around the land being the determinative factor in the value of the land, improving public services and generally making the city a nicer place to live can have a nasty side effect of increasing land values, which if the exclusion isn't indexed will result in tax bills increasing, and which homeowners won't see much benefit from until they sell. (Assuming you can't, or don't want or need to, take out a line of credit against your property, anyway, where you might be able to get a slightly lower interest rate if your property is more valuable, I think, which would be a benefit.)
Another issue with programs like the home owner grant which here is an oft-complained-about problem is that the grant threshold is set on a provincewide basis, but property values vary wildly across the province. In some municipalities (generally these are located in metropolitan Vancouver, with one exception, which is still nearby), the average home value exceeds the grant threshold! This has prompted calls, at times, for the grant threshold to be determined by municipal conditions, not a single provincewide amount. (On the other hand the economic opportunities afforded by living in the Vancouver area are generally better than those for people living in the rest of the province, but those latter are of course no less valuable for that, so it is perhaps not unreasonable to ask Vancouverites to subsidize the rest of the province in this regard.) I will admit that I don't know on what basis the Minnesota exclusion is determined.
As with so many policy questions, there's no one definitively best answer to the question of whether and how to assess property tax.
Further on the point of assessing property tax, I'm reminded of reported remarks from the CEO of McDonald's, who claimed that McDonald's is not a food business, but rather a real estate business.
McDonald's does licence their recipes to their franchisees, of course (I don't know how ones developed for particular local markets, such as the Chicken Maharaja Mac in India, are handled). But the money from that is small compared to how they make money from owning land.
McDonald's owns the land underneath franchise locations, and leaves the restaurant itself to someone else to run. The franchisee is responsible for paying McDonald's for the use of the land (and the recipes), which is a fixed cost regardless of the profitability of the restaurant, and is left to handle the ongoing costs of running the restaurant, such as staff and maintenance, and keeps the profits. In a sense, McDonald's is extracting a private property tax from its franchisees! (I do not know to what extent other businesses in that industry follow this same model.) It can be more profitable for McDonald's to give a store to a franchisee rather than run it themselves, because as long as the franchisee can keep the store operational, McDonald's gets a guaranteed amount while not assuming most of the risks*.
(Outside the United States, McDonald's, and other such chains, will often enter into a master franchise agreement with some entity in another country, whereby the master franchisee pays McDonald's a set amount for the right to operate and/or franchise McDonald's in that country, and keeps whatever profit is made. McDonald's receives a guaranteed return while the retail business is run by someone who actually knows the economic conditions and social tendencies of the country. Just imagine if a bunch of USAian corporate executives who don't know much about Hinduism tried to sell standard Big Macs in India, or the McRib in Israel or a Muslim-majority country.)
*Obviously there are some risks. To take an example from another industry, Stellantis is proposing to close its auto manufacturing plant in Brampton, Ontario and move production to the United States, due to uncertainty over tariff costs imposed by Jeffrey Epstein's best friend. Brampton City Council, liking that about as much as any Canadian likes what the southern annexationist aggressor is doing right now, has rezoned the land under the plant so that it can only be used for automobile manufacturing (https://www.bramptonguardian.com/news/brampton-stellantis-plant-re-zoning/article_e8623465-526c-575f-94a6-ce47fbabbfe5.html), immediately impacting Stellantis's ability to sell because they can only sell to another car manufacturer (and thus reducing the value of the property to give Stellantis a middle finger for bowing to the White House squatter while, hopefully, if the plant is sold to a company like Toyota, Honda, Hyundai, BMW, Volkswagen, Porsche or BYD, preserving local jobs along with the businesses near the plant which primarily serve plant workers). Any business pursuing a model such as McDonald's runs a similar risk of having their land rezoned.
P.S. Your PM remains open in another tab! I finished this article and a second article by my deadline (this morning), so I can finally turn my attention to it, belatedly. Thanks for your patience!
Even after opening the google sheet and seeing how well thought out your methodology was, I STILL doubt your ‘3 wasted hours’ figure. Every neighboring city/township? 3 random residential properties from each? I was expecting you to say that’s how you spent a weekend!
Great read. The comments from the Facebook group were mostly engaging and not disparaging too!
Eagan stays winning.
Thanks for the comprehensive breakdown - this is good food for thought. Question: is it "worth it" to be closer to St Joe's (or whichever is your parish)? Some people wax poetic about being close to their parish (and it's great! we walk 5 minutes from our apartment to ours), but kids aren't the cheapest to raise these days either.
I'd put a pretty big premium on it.
But, then, I would! We told our realtor to only show us houses within 1 mile of Nativity or St. Joe's. That was the one time she got visibly frustrated at us.
Still, it paid off. Once the kids, enrolled in the parish school, reached walking age, we taught them to walk home. (They were both perfectly capable of this by age 6, but we waited until the oldest was 8 because -- forget about Flock -- America is a CPS police state: https://reason.com/2026/09/02/virginia-mom-gets-6-month-suspended-jail-sentence-for-letting-5-year-old-walk-to-the-pond/ )
We can just let them play after school now and they walk home when they're done. They have a watch, an emergency plan, and know to be home by a certain time. I avoid the daily traffic nightmare of pickup time, and they get hours of outdoor time several days a week with friends (most of whom also live within walking distance), unsupervised by parents, developing that rich anti-fragility Jonathan Haidt's always on about, and often their favorite part of the day.
If our parish were in WSP, but we lived in Eagan, doing that would be at least a lot more complicated.
The daily mileage alone has gotta add up in terms of gas and wear-and-tear, although I haven't done the figures.
Even with WSP's very high residential taxes, I suspect it's a cheaper place to live anyway, in general, because our home values are so much lower than eagan's. Another $100k on a mortgage, is $450-750 a month, depending on interest rates, which more than makes up for anything extra you pay in property taxes. WSP is less affordable than it was, but I *suspect* that (in part thanks to Dakota County's low tax rate) it's still a local leader in affordability.
This was quite good.
Asset-based means tests, particularly ones based on real property, can in some ways be worse than income-based tests.
In all cases, of course, policymakers should be careful to ensure that there's never a METR above 100%, though having a plethora of means-tested credits can make the rate get uncomfortably close to that.
The problem with asset-based means tests, though, is that it is much harder for the asset owner to control the value of the asset. At least with income it is generally possible to have some amount of control over how much you make: you can do overtime, seek a better-paying job, or pick up part-time employment after your regular employment. (All of this comes with quality-of-life tradeoffs, though, of course, and there was that case study done by one of the US Federal Reserve branches showing that a single mother of one child in DC ends up, after cash and cash-equivalent benefits, not seeing any substantial difference between making around $10,000 and $60,000 yearly, as I recall.)
But controlling the value of a home, and especially that part of it which comes from the land on which it rests, is often beyond the capability of the homeowner to control. A homeowner can, through no action of their own and with essentially no way to get out of it, see the value of an asset-based benefit (such as the homestead exemption) decrease. This makes it harder for families to manage their budgeting, not knowing what their property tax bill will look like because of the possible loss of that exemption, as you note in the article, which in a time of rising prices and stagnant remuneration is something that should be of significant concern to policymakers.
I will freely admit that I don't know what a good answer to this problem would be. California's notorious Proposition 13 was an attempt, but it has resulted in numerous negative effects and is likely not worth attempting elsewhere. A Singaporean model where the government manages housing stock with an eye both to ensuring adequate housing for a growing population and controlling the rate of appreciation in value of existing housing might be worth considering.
The really interesting property this has, though, is that, precisely because owners have no effective control over their land value, the phase-out creates no meaningful disincentives (that I can think of).
One way to improve the homestead exclusion (I called it an exemption in the article, but I think I need to update that, because it's officially called an exclusion) would be to do what we recommended in "Give The Rich More Money!": instead of phasing it out (which hits the homeowner coming and going), turn it into a flat exemption that applies to everyone, so that everyone gets (say) the first $40,000 of value excluded from their property tax. The size of this exclusion can be computed to be revenue-neutral, and overall tax rates can rise to help compensate for the additional exemptions.
Because, you're right, just as with income-based means testing, the effect of the current exclusion law is to hit homeowners' marginal effective tax rates coming and going. Their bill rises first because their home value has gone up, and then rises a second time because that reduces the percentage of home value excluded.
But I worry that the approach I suggest here would end up being a wealth transfer from the middle class to the rich, which would probably be worse. Property tax (in Minnesota) doesn't have brackets, so there aren't as many tools available to ensure the tax incidence remains neutral along with the revenues. I'd have to do actual math to figure that out.
The analysis in that piece was reliant on the fact that income tax often has brackets, and that you can just introduce more brackets to refine the scale.
But there's no reason property tax can't have brackets. My province doesn't either, but we do have a graduated system (though it's optional*) for electricity billing (the electricity delivery company for most of the province is a Crown corporation monopoly). If your average daily usage for a billing period (you can choose one or two months) exceeds a certain amount, then the electricity used below the total threshold for the period is billed at a given rate, and the use above the threshold incurs a higher rate. (There are also a few fixed charges, like a basic daily fee incurred regardless of use, which I think is used to maintain some slack in the system so that other providers can be reasonably remunerated regardless of whether there was demand for the power they generated. It isn't perfect, but it's probably helped us stave off major problems like what was seen in Texas in recent years with extreme heat and extreme cold leading to grid failures and extremely high bills.) The same rationale could, in principle, apply to land use. It's just, for whatever reason, not done. To make the home owner grant (as we call it here) universal would probably require introducing such, because otherwise it would indeed become a transfer to the rich, which was avoided in the income-tax context by adding brackets.
*There's four options for residential customers, where you choose between tiered billing or flat-rate billling, and whether you want time-of-day-based pricing or not. https://app.bchydro.com/accounts-billing/rates-energy-use/electricity-rates/residential-rates.html In theory, if you're a night owl and use very little electricity, you could pay quite a low rate per kilowatt-hour!
I should note, however, that depending on what precisely is taxed as far as property goes, the phase-out can create a disincentive. If only the land is taxed, then it generally creates no disincentive. But if the value of the buildings is also taxed (it is here) then it creates a disincentive to improve your house! (Or, at least, it creates a disincentive to improve it going through the proper bureaucratic channels where everything would be on file for the assessors to look at; improving it off the books, as it were, would make the house more valuable without incurring an increased assessment unless the assessors come poking around the neighbourhood, though you would likely be limited in how much you could improve it before you had to apply for appropriate permits.) The landowner can't do much about the value of the land, because that's determined (at least so George argued) by the community around the land, but she can do a great deal about the value of what's on the land. And even then, if George was right about the community around the land being the determinative factor in the value of the land, improving public services and generally making the city a nicer place to live can have a nasty side effect of increasing land values, which if the exclusion isn't indexed will result in tax bills increasing, and which homeowners won't see much benefit from until they sell. (Assuming you can't, or don't want or need to, take out a line of credit against your property, anyway, where you might be able to get a slightly lower interest rate if your property is more valuable, I think, which would be a benefit.)
Another issue with programs like the home owner grant which here is an oft-complained-about problem is that the grant threshold is set on a provincewide basis, but property values vary wildly across the province. In some municipalities (generally these are located in metropolitan Vancouver, with one exception, which is still nearby), the average home value exceeds the grant threshold! This has prompted calls, at times, for the grant threshold to be determined by municipal conditions, not a single provincewide amount. (On the other hand the economic opportunities afforded by living in the Vancouver area are generally better than those for people living in the rest of the province, but those latter are of course no less valuable for that, so it is perhaps not unreasonable to ask Vancouverites to subsidize the rest of the province in this regard.) I will admit that I don't know on what basis the Minnesota exclusion is determined.
As with so many policy questions, there's no one definitively best answer to the question of whether and how to assess property tax.
Further on the point of assessing property tax, I'm reminded of reported remarks from the CEO of McDonald's, who claimed that McDonald's is not a food business, but rather a real estate business.
McDonald's does licence their recipes to their franchisees, of course (I don't know how ones developed for particular local markets, such as the Chicken Maharaja Mac in India, are handled). But the money from that is small compared to how they make money from owning land.
McDonald's owns the land underneath franchise locations, and leaves the restaurant itself to someone else to run. The franchisee is responsible for paying McDonald's for the use of the land (and the recipes), which is a fixed cost regardless of the profitability of the restaurant, and is left to handle the ongoing costs of running the restaurant, such as staff and maintenance, and keeps the profits. In a sense, McDonald's is extracting a private property tax from its franchisees! (I do not know to what extent other businesses in that industry follow this same model.) It can be more profitable for McDonald's to give a store to a franchisee rather than run it themselves, because as long as the franchisee can keep the store operational, McDonald's gets a guaranteed amount while not assuming most of the risks*.
(Outside the United States, McDonald's, and other such chains, will often enter into a master franchise agreement with some entity in another country, whereby the master franchisee pays McDonald's a set amount for the right to operate and/or franchise McDonald's in that country, and keeps whatever profit is made. McDonald's receives a guaranteed return while the retail business is run by someone who actually knows the economic conditions and social tendencies of the country. Just imagine if a bunch of USAian corporate executives who don't know much about Hinduism tried to sell standard Big Macs in India, or the McRib in Israel or a Muslim-majority country.)
*Obviously there are some risks. To take an example from another industry, Stellantis is proposing to close its auto manufacturing plant in Brampton, Ontario and move production to the United States, due to uncertainty over tariff costs imposed by Jeffrey Epstein's best friend. Brampton City Council, liking that about as much as any Canadian likes what the southern annexationist aggressor is doing right now, has rezoned the land under the plant so that it can only be used for automobile manufacturing (https://www.bramptonguardian.com/news/brampton-stellantis-plant-re-zoning/article_e8623465-526c-575f-94a6-ce47fbabbfe5.html), immediately impacting Stellantis's ability to sell because they can only sell to another car manufacturer (and thus reducing the value of the property to give Stellantis a middle finger for bowing to the White House squatter while, hopefully, if the plant is sold to a company like Toyota, Honda, Hyundai, BMW, Volkswagen, Porsche or BYD, preserving local jobs along with the businesses near the plant which primarily serve plant workers). Any business pursuing a model such as McDonald's runs a similar risk of having their land rezoned.
"West St. Paul" and "Regular St. Paul" is pretty amusing. Other states have crazy complex property taxes, too but nothing more to add beyond here.
P.S. Your PM remains open in another tab! I finished this article and a second article by my deadline (this morning), so I can finally turn my attention to it, belatedly. Thanks for your patience!
Thank you for the update!! Whenever you can get to it is great. I know what deadlines are like. :)
Even after opening the google sheet and seeing how well thought out your methodology was, I STILL doubt your ‘3 wasted hours’ figure. Every neighboring city/township? 3 random residential properties from each? I was expecting you to say that’s how you spent a weekend!
Great read. The comments from the Facebook group were mostly engaging and not disparaging too!