House committee takes action to improve property tax refunds, aids to local governments

Efforts to ensure that Minnesotans don’t pay too high a share of their incomes in property taxes took another step forward this week as the House Property and Local Tax Division passed its Division Report. The report was authored by Representative Jim Davnie and amended on to House File 2.

Policymakers have made it a priority to reduce reliance on property taxes, and we’ve been making the case that Minnesota’s renters should be included. We’ve advocated for improvements to the Renters’ Credit, which refunds a portion of the property taxes that renters pay through their rents. Funding for the Renters’ Credit isn’t keeping up with the growth in rental property taxes, and it has been eroded by a 13 percent cut passed in 2011.

The Division Report would increase the Renters’ Credit by $15.5 million in FY 2015. Close to 80,000 currently eligible renters would see an average $152 increase in their property tax refunds. In addition, some Minnesota households would become eligible to receive a refund. These improvements in the Renters’ Credit are an important step toward a fairer tax system that doesn’t ask low- and moderate-income Minnesotans to pay more than their fair share to support local services.

In addition, the bill includes a $157 million increase in FY 2015 in the Property Tax Refund for homeowners, also called the Circuit Breaker. An estimated 421,500 currently eligible Minnesota homeowners would see an average $219 increase in their refunds. In addition, more Minnesota homeowners would qualify for the refund. The Division Report also includes a substantial one-year outreach effort to reach the estimated one-third of eligible homeowners who do not apply for the Circuit Breaker.

The Division Report also includes additional funding for local governments in order to reduce property tax pressures and fund local services. It includes $60 million in FY 2015 and a new distribution formula for Local Government Aid for cities, and $30 million for County Program Aid.

The Division Report now will go to the House Tax Committee for incorporation into the omnibus tax bill. You can find the language and fiscal spreadsheet for the division report on the House Property and Local Tax Division’s webpage.

-Nan Madden

About Nan Madden

Nan Madden is director of the Minnesota Budget Project.
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