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Renters should be included in property tax reform

Minnesota Budget Bites

Improvements to the Renters’ Credit should be part of tax reform passed this legislative session.

Here’s why.

Governor Dayton and legislative leaders have raised concerns that Minnesota has become over-reliant on property taxes. Two kinds of strategies are needed to reduce the growing reliance on regressive property taxes:

  • Ensuring the state’s tax system raises adequate revenues to fund the state’s priorities and stop pushing funding responsibilities and property tax pressures to cities, counties and school districts.
  • Making property taxes a smaller part of Minnesotans’ tax bills.

It’s this second category of policies I’m going to address today. One of the targeted ways the state ensures that Minnesotans don’t pay too high a share of their incomes in property taxes is the Property Tax Refund, known also as the Circuit Breaker for homeowners and the Renters’ Credit for renters.

More than 300,000 low- and moderate-income Minnesota households receive the Renters’ Credit, which refunds a portion of the property taxes they pay through their rents. As our new issue brief shows, the Renters’ Credit is an important tool for tax fairness in every county of the state. More than one-quarter of participating households include seniors or people with severe disabilities.

The Renters’ Credit can make a real difference in ensuring that these Minnesotans aren’t paying more than their fair share in taxes. Without it, rental property taxes are among the most regressive taxes in the state.

But improvements are needed. Funding for the Renters’ Credit isn’t keeping up with the growth in rental property taxes. And it was eroded by 2011 tax legislation that cut the Renters’ Credit by 13 percent, or $26 million.

There’s growing support for improving the Renters’ Credit. Already, 50 members of the Minnesota House of Representatives are authors of bills that include increases in the Renters’ Credit: House File 2 (lead author Representative Jim Davnie), House File 24 (lead author Representative Joe Mullery), House File 126 (lead author Representative Tim Faust), and House File 173 (lead author Representative Will Morgan). Governor Dayton is also a strong supporter of the Renters’ Credit.

In addition, HOME Line, a tenant advocacy organization, recommends a number of improvements to ensure that Minnesotans receive the tax credits they qualify for, based on the real-world challenges Minnesotans face in the application process.

You can find more information about the Renters’ Credit and efforts to improve it this session at our Promoting Tax Fairness for Minnesota Renters web page.

This post was written by Nan Madden and originally published on Minnesota Budget Bites.

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Comments (1)

Agreed, mostly. Good article, Nan.

Thank you for writing this. You will find my comments echoing this sentiment on various articles on MinnPost, most specifically this one:

The one thing I would add is that it doesn't always make sense to correct a problematic tax system with additional "Tax Expenditures", such as the Renters' Rebate and Homeowners' Refund.

We have an opportunity of a lifetime for major redesign which Governor Dayton's Administration has taken a pass on apparently.

For example, most homeowners' property classes have lower effective rates than a renter might (1.00% for the first $500K in property value) whereas rental properties (apartments) are classed at a rate of 1.25%. That puts what is essentially a 25% premium on rental property compared to homesteads. Then again, who receives a truth-in-taxation statement?

(Businesses have it much worse, making business property ownership not competitive in Minnesota.)

I've just released this guide that addresses some of this issues and seeks to enhance Minnesotans tax foundation for more effective participation in this debate and reform.

Keep up the good work; young people, lower-income people and those unable to attain home-ownership rely on our resilient defense to make their futures brighter.

~Bob Helland
onemantaxplan @