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Saint Paul, Minnesota — After a decade of steep property tax increases, Minnesotans will see their property taxes drop in 2014, thanks in large part to direct property tax relief passed by the DFL-led state legislature. A new analysis released today by non-partisan House Research confirms a report provided by the Minnesota Department of Revenue report last Friday[i] that showed property taxes would fall in 2014. A big reason for the reversal on property tax hikes is the $133 million in direct property tax relief for homeowners and renters passed last session through the new Homestead Credit Refund and expanded Renter’s Credit.
“Minnesotans have seen their property taxes skyrocket over the last decade due to budget choices that put corporate special interests ahead of middle class families,” said Speaker Paul Thissen. “We made a different choice this past year – investing in direct middle class property tax relief and restoring the state’s commitment to cities, counties, and school districts. Now, we are seeing results that will keep more money in the pockets of middle class homeowners and small businesses.”
Today’s House report on property tax levies found a small increase in overall levies, but that is only part of the picture when it comes to property taxes. Due to significant direct property tax relief passed by the legislature in 2013, property taxes will drop for the first time in more than a decade.
Digging underneath the first layer, the report includes even better news for homeowners and small businesses. Property tax burdens for homeowners are expected to drop by $46 million in 2014. Greater Minnesota home owners will see the majority of those reductions ($30 million).[ii] Small businesses will see a drop of $6 million.[iii] These figures do not include the additional $133 million in direct property tax relief that will benefit over 400,000 homeowners, so in fact, property taxes will be even lower.
“We made direct property tax relief a priority because it puts resources directly into the pockets of Minnesotans who are paying a greater percentage of their income on property taxes,” said Rep. Ann Lenczewski (DFL – Bloomington) House Tax Chair. “This is in direct contrast to the previous legislature, which took away direct property tax relief from Minnesotans by eliminating the Homestead Credit and cutting the renters’ credit.”
This year’s reduction in property taxes is in sharp contrast to the property tax increases that occurred after the previous Republican-led legislature passed their budget in 2011.
That budget eliminated direct property tax relief to Minnesotans by axing the Homestead Credit. Then in 2012, statewide property tax levies increased by $365 million[iv], or 4.5 percent. An 8 percent increase fell on Greater Minnesota, with a 2.6 percent increase in the metro.[v]
“We have heard a lot of spin from Republicans on the issue of property taxes, but the facts are clear,” said State Rep. Jim Davnie (DFL – Minneapolis), chair of the House Property Tax Division. “Republicans eliminated direct property tax relief and property taxes on Minnesotans went up. Democrats provided more direct property tax relief and property taxes on Minnesotans are going down.”
Although a decrease in property taxes for the first time in a decade marks significant progress, DFL leaders said there is room to make more improvement, particular on agriculture property taxes. Land values on ag-homestead land increased 24% from 2013, resulting in a 12% increase in property taxes.[vi] Rep. Paul Marquart said those increases would have assuredly been higher had the legislature not made property tax relief a priority, but there is a still more that can be done. He and other rural legislators will introduce legislation to provide ag-specific tax relief to lessen property tax burdens of Minnesota farmers.
“When land value jumps so significantly there is going to be an impact on property taxes, but those higher property taxes are sometimes difficult for family farmers to absorb,” said Marquart. “We made significant progress this year to reduce property taxes on rural homeowners and I am hopeful we can make more progress this year on the property tax issue for farmers.”
Republicans and special interests groups have attempted to “cherry-pick” the data to claim property taxes are not going down for Minnesotans. House Majority Leader Erin Murphy said the most important fact is the reality facing Minnesotans.
“Republicans can cherry-pick the data all they want, but it won’t change the bottom-line for Minnesotans,” said Murphy. “The reality is most Minnesotans are going to pay less in property tax this year for the first time in more than a decade. That’s progress and we should work to build on it.”
[i] Minnesota Department of Revenue, Minnesota Property Taxes After Refunds, http://www.revenue.state.mn.us/propertytax/Pages/property-tax-levies.aspx , 2/28/14
[ii] House Research Simulation #14A2, Page 1. “Res Homestead = Residential Homestead - shows percent change of -1.3%, -$46,489,000.” http://www.house.leg.state.mn.us/hrd/issinfo/csim14A2.pdf , 3/3/14
[iii] House Research Simulation #14A2, Page 1. “Com/Ind Lo = Commercial/Industrial Lower Value” – shows percentage change of -2.1%, $-6,264,000 http://www.house.leg.state.mn.us/hrd/issinfo/csim14A2.pdf , 3/3/14
[iv] House Research Simulation, #12A8, Page 1, http://www.house.leg.state.mn.us/hrd/issinfo/csim12A8.pdf , 8/14/12
[v] House Research Simulation, #12A8 Page 1 http://www.house.leg.state.mn.us/hrd/issinfo/csim12A8.pdf , 8/14/12
[vi] House Research Simulation #14A2, Page 1. “Ag Hmstead Land = Agriculture Homestead Land – shows 24.2% increase in market value and 12.0% increase in property tax levy. http://www.house.leg.state.mn.us/hrd/issinfo/csim14A2.pdf ,3/3/14
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