3. SR 02-20-1995 - Laserfiche WebLink

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BUSINESS PROPERTY TAX RELIEF FACT SHEET The Problem The statewide average effective tax rate on commercial/industrial (CI) property is approaching 6% of market value. That's the equivalent of a second 15 year mortgage on every Minnesota business. A mortgage that's due whether or not the business makes a profit oreven opens its doors. CI effective tax rates are more than twice the statewide average for all .property, and almost four times higher than homestead taxes. Minnesota CI taxes are among the highest (if not the highest) in the nation. In most states, effective tax rates are less than 3%. Of Minnesota's 87 counties only one, Cass County, at 2.63% is competitive with this standard.. By moving to Wisconsin, a business can .cut its property taxes in half; to Iowa, by 89%; to South Dakots by 85%; and to North Dakota by about 75°~. Businesses are moving. Forward Wisconsin reports attracting Minnesota companies, 2 irr 1991; 13 in 1992; and 14 in 1993. Growth in Watertown, South Dakota has been fueled by Minnesota companies. Minnesota businesses ;pay twice their proportionate share in property taxes. CI property is 16%° of total market value, but it pays almost 36% of the total property tax bill All of our surrounding states except Wisconsin have classified property taxes;. fiowever, none of them do so to .the same degree as Minnesota. ~ CI's effective tax rate continues to increase despite classification rate reductions in each of the last five years. In 1989, the classification rate on business property was 5.25% Legislation reduced it to 4.6% for taxes payable in 1994. These reductions have not been sufficient to offset increases in local government spending and/or reductions in classification rates for other types of property (e.g. residential and farm homesteads). The statewide average effective tax rate has increased. from 4.4% in 1989 to 5.7% in 1993. The Business Solution Reduce effective tax rates on CI property by doing the following: Reducing. the classification rate on business property relative to all other kinds of property. Make it no more than twice the rate on homesteads. Use market value (instead of taxable value) to assess property tax increases. Make 1994 the base year: Any amount over the base would be assessed against market value instead of taxable value. 'By using market value, property owners will be taxed irr proportion to their share of the actuaF tax base. Pay property tax relief directly to taxpayers using the circuit breaker and renters credit. Doing so will target relief at homeowners/renters with the least ability to pay. Target state aid to local governments at services mandated by the state. Structure -aid to encourage efficiency and reflect local need and tax base rather than past spending. practices.