News Release
State Senator Tony Lourey
District 11
120 Capitol
75 Rev. Dr. Martin Luther King Jr. Blvd.
St. Paul, MN 55155-1606
Telephone (651) 296-0293
sen.tony.lourey@senate.mn
Date:November 28, 2011
Property Tax Increases a Result of Homestead Credit Elimination

After the state shutdown and special session to solve the state’s budget deficit last summer, many legislators would like you to believe that the budget shortfall was solved without raising any taxes. That claim is troublesome and simply untrue. Due to the elimination of the Market Value Homestead Credit (MVHC), Minnesota homeowners and small businesses will pay the price for the legislative budget deal brokered by the Republican majorities last summer. All property owners are seeing this firsthand with the Truth in Taxation statements currently arriving in our mailboxes.

For 44 years, the state has partnered with local governments in giving relief to property taxpayers in the form of the homestead credit that homeowners used to see on their property tax statements. That credit was used to directly offset a portion of property taxes for low and moderate value homes.

The homestead credit has been replaced with a new program called the Homestead Market Value Exclusion, and the Republican line would have you believe it was nothing more than a name change. Under the new system, however, local governments are left with large budget gaps because it reduces the total local property value they are allowed to tax – resulting in reduced total revenue local governments take in and higher property taxes.

Raids on aids and credits to local governments are just another consequence of the no-new-taxes mantra. A recent State Auditor report shows that property taxes are now so heavily relied upon by towns that they make up 72.8% of their revenue stream. Ten years ago only 50% of their revenues came by way of property taxes. The loss of state aids over this time is largely to blame, and the elimination of the Market Value Homestead Credit will only cause greater reliance on property taxes in the future.

The elimination of the Homestead Credit especially hurts rural Minnesota as almost 60% of the credit went directly to homeowners in rural areas. Now senior citizens on fixed incomes, families, farmers and small businesses in our communities are stuck picking up the tab for the state’s general fund deficit.

Republicans say they are not responsible for raising property taxes, but it’s clearly not true. All of us at the Legislature received detailed information showing the expected property tax increases as a result of the homestead credit cut and knew or should have known full-well what the implications would be. That is why I voted against it repeatedly.

After significant push-back from property owners, some Republican legislators have begun to tout a property tax relief bill they plan to introduce in the 2012 session, but the numbers just don’t add up. Their plan would only produce $80 million in property tax relief – a drop in the bucket compared to the $1 billion in property tax increases we will see over the next three years. To increase property taxes in this manner and then restore a small percentage of the increase and call it “relief” is disingenuous at best.

No matter how you slice it, local governments cannot be blamed for this increase. Cutting local aids and telling cities, counties, and towns to “make do” does not reduce property taxes. The costs of critical services are still there and although our cities, towns and counties have tightened their belts, the reductions in state aid are paid for through increased property taxes.

I am committed to bringing down property taxes and will be working next session to bring back the Homestead Credit as well as real property tax relief, and once again fight to make Minnesota’s tax system fairer for working families.

If you have any questions, please feel free to contact me at sen.tony.lourey@senate.mn, or 651-296-0293, or at 75 Rev. Dr. Martin Luther King, Jr. Blvd., St. Paul, MN 55155.

-30-