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Minnesota Business Tax Relief

by Bob Tivnan, Chicago, March 2016

 

Property tax relief for businesses is a focal topic for the 2016 session of the Minnesota Legislature. Minnesota currently has the largest reserves in state history. Lawmakers will consider whether to allocate some of the $2 billion budget surplus to help lower the fixed cost of doing business in the state.

 

Business Property Tax

 

Business Property Tax Minnesota enacted a statewide business property tax 15 years ago. The initial levy was $592 million beginning with taxes payable in the 2002 calendar year. For taxes payable in 2015, the statewide business tax levy was $857 million.

 

An automatic inflator is part of the tax, which raises taxes each year based on the rate of increase in the price index for state and local government expenditures.

 

A Heavy Tax Burden

 

Groups including the Minnesota Chamber of Commerce and the United for Jobs Coalition are calling on lawmakers to get rid of the automatic tax inflator and ultimately phase out the business property tax.

 

They point to the following statistics:

 

  • Businesses have 12.4% of the total property market value but pay 32% of the total
    property tax

  • Businesses have an effective tax rate of 3.88%, higher than homes (1.30%)
    and farms (0.53%)

  • Businesses have the highest class rate of 2.0%

This is a regressive tax paid by all Minnesota families, according to the United for Jobs Coalition. "Business property taxes are ultimately paid by consumers in higher prices of goods, by employees through lower wages, and by investors."

 

The coalition's web site includes testimonials from executives who say the business property tax makes it harder for small and medium sized firms to survive.

 

"The money we pay in business property taxes could have been used for investment in our company's future," explained Mike Jorgensen, president of Impressions Incorporated in St. Paul. "We spend less, hire less, and invest less due to the tax."

 

Steve Wise, president of Cass Screw Machine Products in Brooklyn Center agreed. "It's frustrating to do business in Minnesota where our businesses are looked at solely as a source of income for the government."

 

Reforming the business property tax has bipartisan support. "Business property tax relief is being talked about and we're getting positive feedback from both sides," said Jim Pumarlo, director of communications for the Minnesota Chamber of Commerce. "Having bills already in conference committee will hopefully expedite the process of finding middle ground."