Proponents of the elimination of the state business property tax have touted the tax relief that will flow to greater Minnesota businesses. However, the vast majority of the relief will flow to the seven-county metropolitan area, with over a third going to Hennepin County alone.
This article is part of a continuing series which examines the proposal to eliminate the state business property tax. Part 1 examined the distribution of tax relief between high value versus low value businesses. Part 2 addressed the question of whether—given the projected size of the state budget surplus—Minnesota could afford to forego the revenue generated by the state business property tax. This third installment will examine the regional distribution of tax reductions resulting from the elimination of the tax.
For taxes payable in 2016, the State of Minnesota will collect just over $800 million through the state business property tax. The statewide amount of the property tax increases each year based on the rate of inflation. By 2022—the year in which the phase-out of the state business property tax will be complete under some proposals—the state is projected to generate over $900 million through the state business property tax. The graph below shows the regional distribution of tax relief resulting from the elimination of the state business property tax based on data for the most current year available (assessment year 2015, corresponding to tax payable year 2016).
Approximately one-third of the tax relief from the repeal of the state business property tax will go Hennepin County, while another third will go the remaining six metropolitan counties (Anoka, Carver, Dakota, Ramsey, Scott, and Washington). With 45 percent of the state’s population, the eight counties comprising greater Minnesota would get 34 percent of the statewide property tax relief resulting from the elimination of the state business property tax.
The table below shows the per capita property tax relief resulting from the elimination of the state business property tax for each of Minnesota’s 13 regions* based on data for tax payable year 2016. The average relief statewide would be $149 per capita. Of the thirteen regions, only the seven county metropolitan area would receive per capita tax relief ($180 per capita) above the statewide average. Each of the twelve greater Minnesota regions receive per capita tax relief below the statewide average, ranging from a high of $145 per capita in northwest Minnesota to a low of $60 per capita in east central Minnesota.
|Based on Pay 2016 Tax Data||Estimated Population||Estimated Tax Relief from Elimination of State C/I Property Tax|
|North Central Minnesota||162,834||$16,343,421||$100|
|South Central Minnesota||116,389||$11,721,695||$101|
|West Central Minnesota||43,758||$4,707,543||$108|
|East Central Minnesota||163,555||$9,781,737||$60|
|Seven County Metro||2,979,343||$535,666,550||$180|
If we group all of greater Minnesota together, the level of tax relief resulting from the repeal of the state business property tax amounts to $113 per capita, less than two-thirds of the level of per capita relief in the seven county metro.
It is accurate to say that some of the tax relief resulting from the repeal of the state business property tax will go to greater Minnesota. It is not accurate to imply that the elimination of the state business property tax is in any way tax relief that is especially targeted to greater Minnesota. In terms of overall tax relief as well as on a per capita basis, the preponderance of tax relief resulting from the repeal of the state business property tax goes to the metropolitan area.
*The thirteen regions here are based on a Department of Revenue classification as used in state abstracts. The counties comprising each region are listed below.
Northwest Minnesota: Kittson, Marshall, Norman, Pennington, Polk, Red Lake, and Roseau counties; Northern Minnesota: Beltrami, Clearwater, Hubbard, Lake of the Woods, and Mahnomen counties; Northeast Minnesota: Aitkin, Carlton, Cook, Itasca, Koochiching, Lake, and Saint Louis counties; Western Minnesota: Becker, Clay, Douglas, Grant, Otter Tail, Pope, Stevens, Traverse, and Wilkin counties; North Central Minnesota: Cass, Crow Wing, Morrison, Todd, and Wadena counties; South Central Minnesota: Kandiyohi, McLeod, Meeker, and Renville counties; West Central Minnesota: Big Stone, Chippewa, Lac Qui Parle, Swift, and Yellow Medicine counties; East Central Minnesota: Chisago, Isanti, Kanabec, Mille Lacs, and Pine counties; Central Minnesota: Benton, Sherburne, Stearns, and Wright counties; Southwest Minnesota: Cottonwood, Jackson, Lincoln, Lyon, Murray, Nobles, Pipestone, Redwood, and Rock counties; Southern Minnesota: Blue Earth, Brown, Faribault, LeSueur, Martin, Nicollet, Sibley, Waseca, and Watonwan counties; Southeast Minnesota: Dodge, Fillmore, Freeborn, Goodhue, Houston, Mower, Olmsted, Rice, Steele, Wabasha, and Winona counties; Seven County Metro: Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington counties.