Dollar for dollar, no program does more to promote tax progressivity than the renters’ property tax refund. Credit progressive leaders in the House and Senate for maintaining funding for this program in the face of steady pressure from Governor Pawlenty to gut it.
The rental property tax is the most regressive of all property taxes, meaning that a disproportionate share of the tax falls on low and moderate-income households that have the least ability to pay. The renters’ refund picks up a portion of the property tax that is passed on to lower-income renters in the form of higher rent. A cut in the property tax refund is a de facto increase in the taxes passed on to these low-income Minnesotans. This is the third consecutive year that the Governor has gone after the renters’ refund and the third consecutive year that progressive leaders have blocked it (at least so far).
The Governor is currently seeking to cut $53 million (26%) from the renters’ refund. The Governor argues that current law overstates the share of rent that renters’ pay in the form of property taxes and thereby provides refunds that are too generous. However, the Governor’s data does not support his conclusion. The claim that current law overstates the property tax borne by renters is based on data for all renters, including higher-income renters who do not receive the refund. No information has been submitted that indicates that current law overstates property taxes borne by those lower-income renters who actually receive the refund.
Previous analysis from Minnesota 2020 has demonstrated that since 2004 funding for the renters’ property tax refund has not kept pace with the growth in rental property taxes, thereby making rental property taxes-which were already among the most regressive taxes in the state-even more regressive. The Governor’s proposed cut to the refund further accelerates the drift toward greater regressivity.
When the Governor proposed cutting the renters’ refund in 2008, Minnesota 2020 readers weighed in. One refund recipient told her story.
I am a 70 year old senior citizen on a very low and fixed income. I am struggling to even pay my rent in what is “supposed” to be a below market rate apartment. My rent takes most of my social security income with very little left for my health care premium (cannot make it on Medicare alone!!!) The property tax refund makes it possible for me to get dental care or a needed car repair on my old car.
Marilyn Wegscheider
Mounds View
Another reader, no longer a recipient of the refund, saw the value of the program.
I have not rented housing for 21 years. I rented apartments as a college student, young adult and early in our marriage. I remember receiving my share of rental property tax return. It helped pay the rent! Let’s not be greedy and over tax people who rent. Lets have everyone pay their fair share. I am in a position to pay a little more now. Lets (sic) be responsible citizens.
Elaine Gibbs
St. Louis Park
Yet another summed up the Governor’s proposed raid on the renters’ refund as follows.
This is very sad news. It seems to be a rather typical strategy of avoiding tax increases for Minnesota’s higher income earners and placing the burden on Minnesota’s low income earners. It is another way for our governor to circumvent his “NO NEW TAXES” promise to the wealthy and increase the burden on those who can least afford it.
John Kraker
The beneficiaries of the renters’ refund certainly are not among the powerful and well-connected. All the more reason that special thanks should be given to those legislators who have fought the good fight to preserve the renters’ refund as a bulwark against increasing tax regressivity. With less than two months to go in the 2010 legislative session, progressives should support the continued efforts of these legislators to protect the renters’ refund.
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