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Property Tax Burden Report

Eric WilletteMinnesota Department of Revenue

March 3, 2010

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Measuring Property Taxes

• Net tax amount – the amount of property taxes paid net of any property tax refunds (PTR).

• Effective tax rate – the percentage of the homestead’s market value paid in property taxes in one year (net tax after PTR divided by base parcel estimated market value).

• Tax burden – the percentage of homesteaders’ income paid in property taxes in one year (net tax after PTR divided by the income of all homesteaders).

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About the data

• 2007 property taxes, values, and refunds– Base parcel only

• 2006 income of homesteaders – taxable and nontaxable income

• Four counties failed to report• Agricultural homesteads, relative homesteads and

mobile homes excluded• 97 % of remaining records had income match• 1.3 million homesteads with income

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Determinants of Property Taxes

Parcel share of tax base and total local leviesThese are affected by:• Level of public services• Intergovernmental aid and other non-property

tax resources• Tax base composition and property tax

classification system• Property tax refunds, credits, exclusions

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Findings

1. Market Values2. Net Tax3. Effective Tax Rates (Tax / Value)4. Income5. Value / Income ratio (consumption)6. Tax Burden (Tax / Income)7. Tenure8. Senior homesteads9. PTR participation

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1. Homestead Market Values

$50,000 or less

$50,000 - $100,000

$100,000 - $150,000

$150,000 - $200,000

$200,000 - $250,000

$250,000 - $300,000

$300,000 - $350,000

$350,000 - $400,000

$400,000 - $450,000

More than $450,000

-

50,000

100,000

150,000

200,000

250,000

300,000

Greater MinnesotaMetro

Hom

este

ads

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2. Net Tax$5

00 o

r les

s

$500

- $1

,000

$1,0

00 -

$1,5

00

$1,5

00 -

$2,0

00

$2,0

00 -

$2,5

00

$2,5

00 -

$3,0

00

$3,0

00 -

$3,5

00

$3,5

00 -

$4,0

00

$4,0

00 -

$4,5

00

Mor

e th

an $

4,50

0

-

50,000

100,000

150,000

200,000

250,000

Greater MNMetro

Hom

este

ads

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Property Tax Refunds and Net Tax

Net Tax Before PTR (mean)

PTR (mean)

Net Tax After PTR (mean)

Net Tax After PTR (median)

High (Southwest Hennepin) 4,272 120 4,152 3,257

Low (Southwest Minnesota) 998 64 934 726

Metro 2,945 213 2,732 2,279

Greater Minnesota 1,510 110 1,400 1,210

Statewide 2,311 167 2,144 1,810

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

0

100

200

300

400

500

600

Property Tax Refunds

RenterHomeowner

$ M

illio

ns

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3. Effective Tax Rate(Tax / Value)

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Effective Tax Rate(Tax / Value)

0.15% or less

0.15% - 0.30%

0.30% - 0.45%

0.45% - 0.60%

0.60% - 0.75%

0.75% - 0.90%

0.90% - 1.05%

1.05% - 1.20%

1.20% - 1.35%

More than

1.35%

0%

5%

10%

15%

20%

25%

North CentralSouthwest

Perc

ent o

f Hom

este

ads

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4. Homesteader Income

Median Income

Indexed to State Median

Statewide $ 63,551 100 Metro 72,779 115 Greater Minnesota 54,027 85

M Southwest Hennepin 96,414 152M Carver/Scott 82,655 130M Washington 80,677 127M Dakota 77,050 121M Suburban Ramsey 72,922 115M Southeast Hennepin 72,159 114M North Hennepin 69,729 110M Anoka 68,825 108G Central 63,781 100G Southeast 59,232 93M Minneapolis 57,877 91M Saint Paul 56,762 89G East Central 54,948 86G South Central 52,002 82G West Central 51,468 81G Minnesota Valley 51,475 81G Arrowhead 49,292 78G Northwest/Headwaters 47,560 75G Southwest 46,171 73G North Central 45,824 72

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5. Value / Income ratio

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6. Tax Burden (Tax/Income)

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Burden Greater than 5% of IncomeHomesteads with income over $10k

Anoka

Carver/S

cott

Dakota

Washington

Minneapolis

N Hennepin

SE Hennepin

SW Hen

nepin

Saint P

aul

Sub. R

amsey

NW/H

eadwtrs

Arrowhead

West Centra

l

North Cen

tral

Centra

l

East C

entral

MN Valley

Southwest

South Centra

l

Southeast

0%

5%

10%

15%

20%

25%

30%

35%

40%

Before PTR After PTR

Perc

ent o

f Hom

este

ads

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Tax Burden by Income

Income range*

Median burden before MVHC

Median burden before PTR

Median burden after PTR

$10,000 -$30,000 7.4% 6.2 % 3.7 %$30,000 - $45,000 4.7 4.1 3.3$45,000 - $65,000 3.6 3.3 3.0$65,000 - $90,000 3.0 2.8 2.7$90,000 - $125,000

2.6 2.4 2.4

$125,000 or more 1.9 1.8 1.8

*Homesteads with Income under $10,000 not shown due to data issues

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Average Credit and Refund by IncomeIncome Range Average

MVHCAverage PTR MVHC +

PTR$10,000 - $30,000 $213 $415 $628

$30,000 - $45,000 211 303 514

$45,000 - $65,000 200 182 382

$65,000 - $90,000 179 68 247

$90,000 - $125,000

146 16 162

$125,000 or more 87 13 100

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Average Credit and Refund by Region

Average MVHC

Average PTR

MVHC + PTR

Greater MN $212 $110 $322

Metro 144 213 357

Statewide 174 167 341

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7. Tenure (not in report)

Percent of homesteads with tenure of less than five years

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8. Senior status (not in report)

• Senior homestead: at least one homesteader aged 65 or more

Median burden before PTR Median burden after PTR

All homesteads 3.0% 2.8%

Senior homesteads 3.6 3.0

Non-senior homesteads 2.9 2.8

Minneapolis seniors 5.7 4.0

Minneapolis non-seniors 3.9 3.5

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9. PTR participation (preliminary)

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Questions?

Eric WilletteDirector of Property Tax Research

Minnesota Revenue651-556-6100

Eric.Willette@state.mn.us