Proposed Renters’ Credit Cut

There are currently two proposals to cut the renters’ credit: one is proposed by Governor Pawlenty (SF 753/HF 660), and a second, deeper cut, has been proposed in the House by Rep. Westrom (HF 1678). The Senate Majority position does not include a proposed cut.

In calculating the renters’ credit, state law currently bases the formula on the assumption that 19% of rent paid goes to pay property taxes. That percentage was chosen to protect renters from property tax relief received by property owners over the last several years, which was not passed on to renters.

The Governor’s proposal would change the amount of rent considered the renter’s share of property taxes from 19% in 2004 to 16% in 2005 and 15% in 2006. As a result, 12,634 fewer Minnesota households would receive the Renters’ Credit in 2005 than in 2004, and the average amount of credit would drop by $89.

The impact would increase in 2006. Renters would lose a total of $30.8 million from the renters’ credit in 2007 and another $82 million in 2008-09. Westrom’s bill would cut the percent much more dramatically to 13%.

Two examples illustrate the real impact the cut in the Renters’ Credit would have in Minnesotans’ lives:

• Example 1: Linda is a disabled tenant living in subsidized housing in the suburbs. She paid $4,134 in rent in 2004. Under current law, she receives a $560 Renters’ Credit. Her Renters’ Credit would be $106 less if the percentage of rent considered property taxes was 16%, and $148 less if the percentage was 15%.
• Example 2: Mary works full-time at $15.00 an hour, and lives with her two children. She pays $926 a month in rent ($11,112 a year), just about the market rate for a 2-bedroom apartment in the Twin Cities. Housing is considered affordable when it takes no more than 30% of a family’s income; for Mary’s family, housing costs make up over 35% of their income. Her 2004 Renters’ Credit is $1,174. Her 2004 Renters’ Credit would be $233 less if the percentage of rent considered property taxes was 16%, and $311 less if the percentage was 15%.

While the issue seems complex, the impact is very straightforward—low-income Minnesotans are being forced to absorb a tax increase to help balance the budget.

Many groups are lobbying hard to curtail these efforts. You can get involved by visiting the Minnesota Budget Project to view fact sheets and the latest action alerts.