Property Taxes Projected to Decrease Thanks to New State Budget

July 31, 2013 - St Paul, Minnesota — Yesterday, the Minnesota Department of Revenue released new information showing property taxes are projected to decrease for the first time since 2002, thanks to the new state budget. Increased aid to local governments, sales tax exemptions for cities and counties, and direct property tax refunds for hundreds of thousands of homeowners and renters included in new state budget are projected to decrease property taxes next year by an estimated $121 million, or 1.5 percent.

In total, the DFL Budget provides over $300 million in middle-class property tax relief for Minnesotans through the Homestead Credit Refund, retooled renters’ credit and increased aid to counties, cities and townships.

In 2014, the Homestead Credit Refunds will increase by $117 million. Under this program, more than 300,000 homeowners (75% of filers) will see an average refund increase of $212. More than 137,000 additional homeowners will be eligible for a refund.

Rep. John Persell (DFL – Bemidji) is glad the Legislature was able to address rising property taxes in their budget this year.

“Rising property taxes have been a problem for over a decade,” said Rep. Persell. “For years we saw decreases in state aid to local communities and that led to an increase in property taxes at the local level. With our budget this year, we were able to increase aid to cities and counties and offer direct property tax relief for homeowners and renters.”

The previous Legislature raised property taxes on renters who earn less than $55,000 a year by cutting the Renter’s Credit. The new budget enhances the Renters’ Credit, providing property tax relief to Minnesota renters (including elderly and disabled renters), so that the neediest renters see the greatest benefit. Under the improved Renter’s Credit, 66,000 filers will see a bigger refund, 10,000 additional renters will qualify, and the average renter will see their refund increase by $179.

The new budget increases Local Government Aid by $80 million, County Program Aid by $40 million, reinstates $10 million in township aid, and provides a sales tax exemption for local governments, allowing them to collect less in property taxes from their residents. This change will provide property tax relief for Minnesota homeowners and renters by reducing local government expenses by an estimated $172 million.

Roger Erickson (DFL – Baudette) thinks the new money will have a big impact on his district.

“When you talk about increasing local aid to townships, cities, and counties by $130 million, that’s going to have a significant effect on local taxes,” said Rep. Erickson. “Add to that the $172 million in sales tax savings and you’re going to see a very positive budget year for our local communities across Minnesota.”

Since 2002, property taxes have gone up 86 percent, placing a huge burden on the middle class. Those increases were due in large part to repeated cuts in aid to local governments, and cuts in direct property tax refunds for Minnesotans. In fact, between 2002 and 2013, County Program Aid was cut by 39 percent, and Local Government Aid was cut by 25 percent – putting pressure on local governments to cut services and raise property taxes.

As a result of the 2011 Republican budget, statewide property taxes increased by $365 million, or 4.5%. An 8 percent increase fell on Greater Minnesota with a 2.6 percent increase in the metro.

A second report from non-partisan House Research found that statewide property taxes are projected to be $181 million (2.1%) less than they otherwise would be if the legislature kept the budget passed in 2011 by the Republican-led legislature in place.

Regional property tax reductions due to 2014 DFL budget*:

Statewide -$181,311,000 -2.1%

Greater MN -$98,667,000 -3.0%

* These figures do not include the additional $135 million in direct property tax relief programs like the new Homestead Credit Refund or expanded Renter’s Credit.

Source: House Research Tax Simulation Report #13D3, 7/24/13

http://www.house.leg.state.mn.us/hrd/issinfo/csim13D3.pdf