House omnibus tax bill makes dramatic cuts to renters’ property tax refunds

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Last month we discussed dramatic cuts to the Renters’ Credit passed by the House Property and Local Tax Division. Those cuts were used to pay for a reduction in the statewide business property tax.

The cuts have been amended into the House omnibus tax bill (House File 2337), which is expected to be voted on in the House Tax Committee this week. This bill also includes a reduction in the statewide property tax paid by businesses and cabins, as well as increases in a few business tax credits. The committee started to hear testimony today, and we stated our opposition to the cuts to the Renters’ Credit.

The Renters’ Credit refunds a portion of the property taxes that more than 281,000 low- and moderate-income Minnesota households pay through their rents.

The bill proposes a substantial restructuring of the Renters’ Credit, similar to what was passed by the Legislature last year but was vetoed by Governor Dayton. Some of the proposed changes impact all renters:

  • The share of rent that is considered the renter’s share of property taxes is the starting point for calculating the Renters’ Credit. The bill cuts it from 17 percent to 15 percent.
  • The value of the Renters’ Credit would be eroded over time, because the income ceiling and refund schedule would no longer be indexed for inflation.

In addition, the bill would create two very different property tax refund schedules – one for households that include seniors and people with severe disabilities, and one for all other kinds of households.

For households that include seniors and people with disabilities:

  • The maximum income for eligible families is reduced from $53,539 to $40,000.
  • The maximum refund amount is cut for households with incomes between $26,010 and $40,000.
  • The average credit for these households is cut by $111, and 5,200 households will lose their entire credit.

For all other households:

  • The maximum income for eligible families is cut to $25,000.
  • The maximum refund amount is cut from $1,550 to $1,000.
  • Refund amounts are reduced across all income ranges.
  • The average credit is cut by $265 for these households, and 69,400 will lose their entire credit.

These changes would impact property tax refunds this year, which Minnesotans have already begun to apply for, and are in addition to the $26 million cut that was passed in the 2011 budget.

The House Tax Committee is working to pass the omnibus tax bill this week. Lawmakers should reconsider the cuts to the Renters’ Credit. If they believe the business tax cuts in this bill are good policy, they should find a better way to pay for them, rather than asking Minnesota’s low- and moderate-income renters to shoulder the full burden.

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