Who Bears the Burden?

Our class discussion and readings for this week focused on the much hated and often debated property tax. Part of what we asked was, "Is Minnesota's property tax regressive?"

The 2009 Minnesota Tax Incidence Study is conducted every two years by the Department of Revenue to find out just who pays Minnesota taxes. Using 2006 data, the report explores who bears the burden of state and local taxes. So, what did they say about property taxes?

The study shows that in 2006, the effective property tax rate ranged from 7% for the first population decile (households making $9,782 or less) to 1.3% for the top decile (households making %123,939 or more). Holy moly, that's regressive!

Fortunately, Minnesota Property Tax Refunds (PTR) are intended to decrease the tax burden on seniors, people with disabilities, and low to moderate income earners. The PTRs are referred to as Circuit Breakers when they apply to homeowners and Renters Credits for renters. After accounting for these returns, the effective tax rates ranged from 4.2% for the first decile to 1.3% for the top decile. In fact, these returns help make the overall tax system in Minnesota less regressive; they decrease the Suits index from -.075 to -.053.

So who benefits from the PTR? The Minnesota Budget Project points out that in 2007, nearly 600,000 households benefited from the returns. Slightly under half of the beneficiaries were renters and the rest were homeowners. Seniors and people with disabilities made up a significant percentage of those who received both the Circuit Breaker and Renters Credit, 38% and 28% respectively.

Property taxes place a disproportionate burden on low to moderate income households in Minnesota, but the Property Tax Refunds help to lighten the load.