House committee considers bills to improve renters' property tax refunds

Nan Madden
Mar 06, 2013

Minnesotans who count on the Renters' Credit so they don't pay too much in property taxes have cause for optimism.

Policymakers are considering several bills to make improvements to the Renters' Credit. These include House File 2 and House File 173, which recently received hearings in the House Property Tax Division. And Governor Dayton said last week that his supplemental budget would increase funding for the Renters' Credit, which saw a substantial cut in 2011.

That's a good investment for many reasons, as I testified before told the House Property Tax Division. Here are some excerpts of my testimony:

Over time, more responsibility for funding Minnesota’s public services has shifted on to low- and middle-income Minnesotans as our state and local tax system has become more regressive. Increasing reliance on local property taxes has contributed to that trend.

The Property Tax Refund, or PTR, is the targeted tool the state uses to make sure that Minnesotans don’t pay too much of their incomes in property taxes. The PTR recognizes the fact that both homeowners and renters pay property taxes, although they pay it in different ways. Homeowners pay their property taxes directly, renters pay property taxes through their rents.

More than 300,000 low- and moderate-income Minnesota households receive the Property Tax Refund for renters, or Renters’ Credit, and they are found in every county in the state.

  • The Renters’ Credit is targeted to low- and moderate-income Minnesotans. Nearly 80 percent of households receiving the Renters’ Credit have household incomes below $30,000.
  • More than one-quarter of the households receiving the Renters’ Credit include seniors or people with severe disabilities. In 12 Greater Minnesota counties, at least one half of participating households include senior citizens or people with disabilities.

Without the Renters’ Credit, rental property taxes are among the most regressive taxes in the state.

You have an important opportunity this year to make improvements in the Renters’ Credit to ensure that it can continue do its job well. Funding for the Renters’ Credit isn’t keeping up with the growth in rental property taxes. And in 2011, the Renters’ Credit was cut by 13 percent, or $26 million. Close to 300,000 Minnesota households faced an $87 cut in their property tax refunds on average as a result. So the impact of the Renters’ Credit today is less, as a result of those cuts.

Today can be the start of a discussion of how this session you can improve the Renters’ Credit so it successfully achieves its goal. Representative Morgan’s bill [House File 173] takes one approach.

We can also look at other improvements, including:

  • Addressing the marriage penalty that some senior and disabled couples face;
  • Recognizing the needs of our seniors, people with disabilities, and families with children;
  • Ensuring that we don’t hold renters to a higher income test than homeowners at the same income level by harmonizing the refund schedules for homeowners and renters;
  • Making additional progress for those for whom the property tax makes up the highest portion of their incomes.

These improvements would ensure the Renters’ Credit can do its job while remaining income-targeted and focused where it has the greatest impact. In addition, these improvements largely work “under the hood” in the formula, and would not change the familiar process of applying for the Renters' Credit or create any new barriers for renters or landlords.

I encourage this committee to pass improvements to the Renters’ Credit this session so it can continue to be a successful tool in ensuring that low- and moderate-income Minnesotans aren’t paying too much of their incomes toward property taxes.