Here we go again with another proposal to dramatically cut the Renters’ Credit, a property tax refund for about 300,000 low- and moderate-income Minnesota households. It refunds a portion of the property taxes that renters pay through their rents. More than one-quarter of participating households include seniors and/or people with severe disabilities.
On Wednesday night, the House Property and Local Tax Division passed House File 1914, which cuts business property taxes, primarily through phasing out the state property tax paid by businesses and cabins. Unfortunately, it cuts the Renters’ Credit to partially pay for the tax cuts.
If state leaders believe eliminating the statewide business property tax is good policy, surely they can find a broader-based way to pay for it, and not single out low- and moderate-income renters. Here are three reasons state leaders should reject this latest plan.
First, Minnesota’s low- and moderate-income renters already took a hit. The Renters’ Credit was cut by $26 million during the 2011 Special Session, a 13 percent cut. Nearly 300,000 Minnesota households will see an average $87 cut in their credit. About 7,300 households lost their entire credit.
House File 1914 revives a proposal passed by the Legislature last year and vetoed by Governor Dayton. Under House File 1914, another 74,000 households would lose their entire property tax refund – that’s close to one in four participating households. Those still getting a credit would, on average, lose another $221 of their credit – and that’s on top of the $87 already cut last year. That’s a lot of money to these families.
Second, the Renters’ Credit provides a local economic boost. In past debates, renters have talked about how they spend their property tax refunds on necessities like school supplies, medicine and car repairs. That puts money directly into local businesses and the economy.
Third, the Renters’ Credit is meeting its goal of ensuring that low- and moderate-income Minnesotans don’t pay more than their fair share in taxes. For the first time in a while, the state has a budget surplus. Cutting the Renters’ Credit is both unnecessary and a move in the wrong direction.
There is another problem with this bill. The cost of gradually eliminating the statewide property tax grows over time. While in the first year that cost is made up by the cuts to the Renters’ Credit, the bill creates a $229 million hole in the FY 2014-15 budget, a revenue estimate said. Minnesota already faces a $1.3 billion deficit next biennium, and it hasn’t begun to repay the $2.8 billion in school funding shifts. This isn’t the time to dig the deficit hole deeper.
House File 1914 now moves on to the full property House Tax Committee on Tuesday. Leaders need to slow down and reject these deep and ill-considered cuts to the Renters’ Credit. Clearly, tough choices were made last year, and Minnesota’s renters made a contribution toward balancing the budget. They shouldn’t be asked this year to pay for other people’s tax cuts.