If you’re a homeowner paying the second half of your property tax bill this month, pay special attention to your statement. Many of you should notice a line called the Homestead Credit, a direct property tax relief program that lowers homeowner property taxes. Any home valued under about $414,000 automatically receives the credit. The maximum credit is $304 and the average credit is $202. Ninety-five percent of all homeowners receive this benefit.
We’d like all residents to take notice of this special property tax relief now because next year, the Homestead Credit no longer will exist. The state budget “fix” that Republicans insisted on and voted for during the July special session — and which the three of us voted against — included an irresponsible decision to eliminate the Homestead Credit, meaning the property tax reduction you see on this year’s statements disappear next year.
The Republicans replaced the Homestead Credit with a new scheme that will require cities and counties to factor a lower percentage of homeowners’ total market value when applying levies. This “new” program provides $0 in property tax relief, eliminating a program that provided $538 million in relief; it only shifts which property tax payers bear the burden — expected to be homes that have increased or maintained their values, residential rental properties and commercial spaces that are increasing in value.
Probably most upsetting is that unlike the old system, there is no guarantee that this new so-called Homestead Market Value Exclusion will result in lower property taxes for even one homeowner because the deduction no longer is applied directly to individual tax bills. Instead, many homeowners — and business owners, commercial property owners, renters and owners of highly valued homes — will see an increase in their tax bills next year as cities and counties are forced to spread their levies across more properties to make up for the artificially lowered tax base.
This is nothing but a bait and switch by Republicans — trying to appear as though they’re keeping property taxes flat, but actually forcing them up by their very action. It’s a sneaky way to once again push the state’s budget troubles onto property taxpayers. Minneapolis is just one of many cities proposing a zero percent levy increase for 2012, but the city’s hard work at maintaining costs is for naught because of the Republican Legislature’s changes. Minneapolis is predicting at least 35 percent of residential homes in the city will see a city property tax increase of up to 5 percent in 2012, even though those homes have not changed homestead status, have not had any improvements, and fall under the city’s 0 percent levy increase.
The three of us stood with our DFL colleagues to oppose this change in the first place. Democrats have proposed legislation for 2012 that would reverse this year’s decision and restore the Homestead Credit. Minnesota property taxpayers already are on the hook for more than $3 billion of Governor Pawlenty’s budget problems over the past decade. There’s absolutely no excuse for them to pay even more.