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Minnesota Legislature

Legislative News and Views - Rep. Dean Urdahl (R)

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Clarifying homestead credits

Thursday, October 20, 2011
To the editor, I have received a number of questions recently regarding our state's shift from the Market Value Homestead credit to the new Market Value Homestead Exclusion and there are some things to clarify. First, we did not eliminate the property tax relief for homeowners by changing from one program to the other. Instead of realizing property tax relief at the bottom of their property tax statement, homeowners will see the relief at the top in the form of exclusion. What this means is the amount the home will be taxed on is reduced, rather than offsetting a portion of the property taxes you owe. Both methods provide about an equal amount of property tax relief. Second, the credit did not work as intended. Under the old system the state was supposed to reimburse each local government for their share of its credit. However, the state was not holding up its end of the deal; only once out of the last eight years did the state fully reimburse local governments statewide. Often the state would reduce its reimbursement after local governments set their levies. This left many local governments setting their levies higher than necessary in anticipation of cuts to this reimbursement. Simply, the old credit failed its most basic intention: reducing property taxes. The new exclusion eliminates the state reimbursement to local governments but retains tax relief for homeowners. This a more stable system which other states have used successfully and it was endorsed by a number of civic groups in Minnesota. Finally, to help offset potential increases in property taxes, we expanded the Property Tax Refund program available to taxpayers across the state. We recognized that although the switch to the new exclusion provides many long-term benefits, there will be issues to address at the start. PTR is an effective way of delivering property tax relief directly into the hands of property taxpayers. The increases in this program will benefit taxpayers by mitigating increases due to the one-time change to the new MVHE. There may be some unintended consequences during our transition to the new program. I remain in close contact with local officials to discuss ramifications and changes that may be necessary to protect businesses and medium-valued homes. We will learn more when tax statements come out in November and I will support efforts to fix any glitches. Sincerely, Rep. Dean Urdahl
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