A tale of two taxes

Our neighbor, Steve, would like to sell his farm. Steve is 93 years old, has essentially retired, and is renting our family the 120-acre parcel of land surrounding his homestead. He’d like to sell it to us, but will not sell because of the capital gains tax he would have to pay on the sale (here are some reads on capital gains taxes: MN House Research, Farm Bureau, IRS). This is not an uncommon scenario and is known as the “lock-in effect”, where farmland is passed on to family heirs, “locked-in” by the owning family, rather than exchanged on the market. At tax rates for real estate income ranging from 20-28% within recent years, he’d likely lose $150-300,000 on the property sale. In Steve’s words, “the best thing to do is die!” The capital gains tax, along with estate taxes, are extremely unpopular among many farmers and ranchers, and often a rallying cry for many against liberal policymakers.

Denise, a doctor in the Twin Cities with a gorgeous house in the Minneapolis neighborhood of Lake Bde Maka Ska, is concerned about the city raising property taxes to pay for police misconduct payouts to victims of police brutality, including George Floyd’s family, during the protests in June 2020. Many cities in American rely heavily on their residents’ taxes to compensate for police brutality, and we’re not unique in Minnesota. The first payout to a citizen wrongly injured during the civil unrest was authorized by the Minneapolis City Council earlier this week. Graciela Cisneros, 21, was awarded $57,900 after allegedly being shot in the face with a less-than-lethal round fired by an MPD officer on May 30^th, 2020 (Star Tribune, MPR). The family of Justine Ruszczyk Damond, killed by a Minneapolis police officer in 2017, was paid $20 million, and it is likely that a payment of similar scale will be made to the family of George Floyd. Denise went as far as to say she would move out of the city if their taxes were raised for these expenses.

Our taxes are the financial and, eventually, physical manifestation of the world we’d like to live in at the local, state, and national levels. One of my close friends often says that, “budgets are ethical statements,” There have been few years in American history that have so violently demonstrated these truths. Most frustrating to me is the partisan nature of this truth. To the people I’m talking about today, party alignment is critical to getting the property tax policies they want to see. I have family friends and neighbors that do not believe in the racist, divisive, falsehood-riddled rhetoric of former President Trump, but nonetheless throw all their support behind the Republican Party in hopes of lowering capital gains and estate taxes, amongst other issues. Nice white parents in Minneapolis and St. Paul may throw their support behind progressive agendas that benefit select parties and their property taxes but fail to really tackle issues that would improve the lives of people of color. Rather pushing to reform police departments, Republican law-makers have pursued legislation that would alleviate residents’ tax burden and allow cities to sue protestors for the cost of policing civil unrest.

At a glance, it certainly appears that many of us, traditionally “Minnesota nice”, are principled first by our bottom lines and second by whatever personal ethics we follow to treat others as we’d like to be treated.

Making real change is going to require personal investment and personal sacrifice.