Renters pay for others’ tax cuts in House bill

It may come as a surprise that the House omnibus tax bill, which has over $1 billion in tax breaks for everything from high-value estates to tickets for Super Bowl-related events, includes what’s essentially a $41 million tax increase on lower-income renters.

Minnesota has long had tax policies that limit how big a share of a household’s budget can go toward paying property taxes. For renters, that is the Property Tax Refund for Renters, more commonly known as the Renters’ Credit or Renters’ Rebate, which refunds a portion of the property taxes that renters have paid through their rents.

We recently updated our analysis of who receives the Renters’ Credit, which looks at information for each Minnesota county. About 336,000 Minnesota households received the Renters’ Credit in 2014, about 27 percent of which included senior citizens or people with disabilities. This percentage tends to be higher in Greater Minnesota, and in fact, in eight Greater Minnesota counties, at least one-half of participating households included seniors or people with disabilities.

Minnesotans already saw their Renters’ Credits get smaller in 2015, after a one-time boost in 2014 went away, and the House tax plan (House File 4) would mean a further roller-coaster ride. For Tax Year 2017, there are multiple changes in the formula for calculating the Renters’ Credit, which net out to a small $1.8 million increase. However, that disguises the fact that there are winners and losers. About 184,000 households would benefit by an average of $77, but another 190,000 would see an average $65 cut in their Renters’ Credits, according to analysis by the Minnesota Department of Revenue.

Starting in Tax Year 2018, there are no winners. The bill would cut the Renters’ Credit by about $41 million per year for more than 340,000 households. These Minnesotans would see a roughly $115 reduction in their property tax refunds on average; the hardest hit would be residents of Greater Minnesota and the city of St. Paul.

It can be really hard for people living paycheck to paycheck, and elders or people with disabilities on fixed incomes, to cover the most basic necessities. About 70 percent of the households who would be harmed by the cuts to the Renters’ Credit have incomes roughly $31,000 or less.

Our friends at Prepare+Prosper, who assist low- and moderate-income Minnesotans in filing their taxes, recently shared some insights with us. They asked some of their customers how they use their Renters’ Credits, and the answers are sobering. We heard about delayed dental work and other health care expenses not covered by insurance. We heard about how the property tax refund arrives just in time for Minnesota families to afford needed school supplies and clothes.

Policymakers will soon begin negotiations to develop a final tax bill. Rejecting cuts to the Renters’ Credit should be one of the first decisions that they make.

-Nan Madden

About Nan Madden

Nan Madden is director of the Minnesota Budget Project.
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