I received a call-to-action email from another Minnesota agent yesterday. I wanted to share portions of that email with my readers. Its troubling, segments of the Minnesota government appear to be trying to solve their financial problems by harming the housing market just as it is getting a foothold again. We may be able to stop this disaster from passing by contacting our legislators. Read on:
On Monday, the Minnesota House of Representatives Tax Committee released a "delete all amendment" to HF2323 and added provisions that are negative for real estate in the Omnibus Tax Bill. Authored by DFL Representative Ann Lenczewski, it contains a number of tax law modifications that hurt all Minnesota home owners.
Since 1992, even with all of the Budget Shortfalls Minnesota has faced, the government spending has increased each and every year. In fact, Minnesota State spending has gone from $14.5 billion in 1992/93 to $34.6 billion in 2008/09 - that's a whopping 138 percent increase.
To resolve the budget shortfall, the House/Senate DFL plans focus on raising taxes and reduce spending. Governor Pawlenty has proposed a plan focused on reducing spending and raising revenue without raising taxes.
HOUSE TAX BILL HURTS REAL ESTATE. The DFL House Tax Plan raises revenue by cutting a number of income tax deductions. Of significant concern to Minnesota REALTORS® and homeowners, the DFL House plan eliminates two major real estate tax deductions: the Mortgage Interest Deduction and Real Estate Property Taxes. The bill also eliminates provisions of the Relative Homestead Tax.
Elimination of Mortgage Interest Deduction (MID)- a feature of the tax code since 1933, the MID has helped numerous generations achieve the American Dream of owning a home. A significant public policy objective for decades, homeownership stabilizes families, neighborhoods and communities. The House DFL Tax Bill eliminates the MID for homeowners and replaces it with a "housing credit" for qualified homeowners. The maximum credit is $420, which is equal to 7 percent (7%) of up to $6,000 of mortgage interest paid during the taxable year. However, no credit is applied to the first $4,000 of interest paid.
This provision hurts young families disproportionately because mortgage debt loads are highest when people are establishing their households. This provision changes the financial plans numerous families have made when purchasing a home and increases the financial difficulties many are facing during this economic downturn. At a time when housing is finally getting a financial foothold why eliminate a tax provision that has helped millions of families achieve the "American Dream?"
Real Estate Property Tax Deductibility-This public policy provision has been included in the tax code since 1933 and allows taxpayers to deduct property taxes paid from their income. The House DFL Tax Bill eliminates the deductibility of real estate property taxes at a time when local property taxes continue to increase faster than Minnesotan's income.
Relative Homestead - If you own identical houses, with identical values, with identical tax rates you would assume you would pay identical taxes - Right? Not if the House DFL Tax Bill becomes law. In a provision of the bill, authored by a DFL legislator, families that provide housing to other family members will pay more taxes on the second home. The goal of the provision, as stated by the legislator, is to stop parents from buying homes for their college students. MNAR pointed out that this is a small piece of the overall program and instead the proposal will be hurting families trying to assist other family members who may have gone through job loss, divorce or other financial difficulties. Isn't it better to have families provide for families instead of government?
ACTION REQUEST: To fight this unbelievable proposal we are asking that you take three steps:
- Please contact your legislator and let them know how you feel about this proposal.
- Forward this email to your clients, customers and friends. Let them know what is being proposed and give them the web address to review the bill. www.house.leg.state.mn.us/hrd/bs/86/HF2323.html
- Go the extra mile and CALL your legislator about this tax bill. Let him/her know your concerns and how it will impact your clients, your family and your business. Let your Representative know that it is time for our elected officials to "LIVE WITHIN YOUR MEANS" by prioritizing spending and not raising taxes.
You can access the bill summary (48 pages) here.
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