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Financial hit from homestead credit cut hurts, group says

Tammy Barnes holds a news conference Thursday on her front lawn while imploring lawmakers to reinstate the homestead tax credit they voted to eliminate last year. Tribune photo by Ron Adams

WILLMAR -- Tammy Barnes said she and her neighbors, including retired farmers and seniors on fixed incomes, are taking a financial hit on their property taxes this year because the Legislature eliminated the market value homestead tax credit last year.

"We need to hold the Legislature accountable and people need to tell their story and what the impacts have been on them," said Barnes, who confided she'll have to relook at her budget because of the higher property taxes she's paying this year.

On Thursday, supporters of a nonprofit organization called Alliance for a Better Minnesota, conducted a news conference at Barnes' home as part of a tour throughout rural communities they have dubbed the "Greater Minnesota Homestead Heist."

Ryan Furlong, a spokesman for the Democratic-leaning group, said solving the state's budget deficit was put on the backs of middle class Minnesotans and that eliminating the property tax credit resulted in a $370 million, or 4.6 percent, property tax increase that affected 95 percent of Minnesotans.

Furlong said Greater Minnesota took the hardest hit with property taxes increasing 8.1 percent compared to 2.6 percent in the metro area. Business in Greater Minnesota saw their property taxes increase three times more than metro businesses, said Furlong during an interview prior to Thursday's news conference.

Under the old market value homestead credit law, the state was reducing the taxes paid by homesteaded property and instead the state was promising to pay that portion of the tax to the local taxing districts. Property owners saw their bill reduced by the amount of that credit.

Homesteaded property no longer receives a credit that reduces the property taxes paid. Instead, a portion of the homestead's property value is excluded from taxation under the Homestead Market Value Exclusion that replaced the old credit.

The intent of the tour by the Alliance for a Better Minnesota is to highlight the effects of eliminating the market value homestead tax credit and to encourage the Legislature to restore it, but the event also targeted Willmar Republican lawmakers, Sen. Joe Gimse and Rep. Bruce Vogel, for their vote to eliminate the tax credit.

Photos of Gimse and Vogel were on a "wanted" poster that proclaimed their involvement in the "Homestead Heist."

The two legislators helped create an "unfair" system that hits rural Minnesota homeowners, businesses and farmers hardest, said Furlong, adding that the lawmakers need to "return the homestead tax credit that they stole."

But Gimse said the group does not have its facts straight and charged it with "fear-mongering."

He said the market value homestead tax credit system was broken and it was eliminated at the recommendation of organizations that represent townships, cities and counties -- the same local units of government that had received money from the tax credit.

The state in recent years had not always paid the full amount of the credit back to the local units of government even though property owners were still receiving the full credit.

Because revenues did not keep pace with expectations, local governments had been short-changed for the last decade, said Gimse, adding that the new system allows local governments to keep what they levy.

And when it comes to skyrocketing property taxes, Gimse said it just did not happen.

"I haven't seen it. I haven't had constituents calling me telling me," said Gimse, adding that his residential property taxes actually went down.

He said preliminary research he has seen shows residential property taxes increased about 2 to 2.5 percent across the state.

Gimse said property taxes were not as "astronomical" as some predicted and that people from Alliance for a Better Minnesota are not being honest and are "ginning people up" as they travel across the state. "That's inappropriate activity in my opinion," he said.

Vogel said he has not heard any complaints about property taxes either and some constituents have told him they were surprised they did not go up more.

Part of the reason for higher taxes on farmland is because value of agricultural land has increased dramatically, said Vogel, who is a Realtor.

He said counties put too much of the property tax burden on small businesses, which he said he hopes can be corrected in the next legislative session, along with some relief for farmland. But Vogel said the old homestead tax credit system will not be restored.

"Let's not go back to something that was failing," said Vogel.

Furlong said when property taxes are paid in October, people in rural Minnesota will pick up 64 percent of the new tax tab that's a direct result of legislators eliminating the homestead credit.

Carolyn Lange

A reporter for more than 30 years, Carolyn Lange covers regional news with the West Central Tribune.

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