Local businesses hope for tax relief this year
WORTHINGTON -- Tax relief may come to businesses across Minnesota in the upcoming legislative session. The session starts March 8, and Minnesota congressional leaders are split on what to do with the state's $900 million surplus. The Minnesota Ch...
WORTHINGTON - Tax relief may come to businesses across Minnesota in the upcoming legislative session.
The session starts March 8, and Minnesota congressional leaders are split on what to do with the state’s $900 million surplus. The Minnesota Chamber of Commerce hopes legislation will be passed to permanently fund transportation in the state and to reduce taxes on businesses - an issue facing Worthington.
“That’s the disadvantage of Worthington: we have Iowa and South Dakota as neighboring states, and some businesses might decide to build just over the border,” said Worthington Area Chamber of Commerce Executive Director Darlene Macklin.
On average, the controversial statewide levy comprises about a third of the total property taxes businesses and cabins pay every year. The tax increases automatically each year by the rate of inflation. It is projected to increase by $45 million annually, according to the Minnesota Chamber of Commerce. It was implemented in 2002 and raised $585 million; in 2015, it raised $856 million.
Rural Minnesota ranks second in the nation for the highest commercial taxes; metro properties rank sixth, according to a 2015 study by the Minnesota Center for Fiscal Excellence and Lincoln Institute of Land Policy.
“We should give a boost to businesses because the economy is finally stable,” said Minnesota Chamber of Commerce Director of Communications Jim Pumarlo, adding that it is projected the state will have “healthy spending” for the next two years.
The general fund is projected to increase 7 percent from fiscal years 2016-17 to 2018-2019.
The Minnesota House of Representatives and Senate drafted two bills to provide commercial tax relief. The issue has bipartisan support, but a solution is not as agreeable.
The Minnesota Chamber of Commerce supports a proposal drafted by the House of Representatives to halt the tax from increasing due to inflation and to slowly phase out the tax over the next six years. The businesses would still pay the local property taxes, and the proposal will not shift costs to homeowners, said Pumarlo.
The Senate proposal reduces the state tax by $51 million, but does not stop it from increasing in the future.
“Taxes are the biggest barriers to business in Minnesota,” Pumarlo said. “It impacts all businesses - small ones, larges ones, ones that have made a profit and even ones that haven’t. No matter what, you have to pay that tax.”
“All these people choose to build in Minnesota when they could build just across the border,” said First State Bank President Greg Raymo. “When they commit to Minnesota, they end up committing to its taxes.”
“That just ends up being an absorbed cost. (Businesses have) to be careful, because (they) can’t raise the price of their product too high because they have competitors, but they also have to pay this tax,” Raymo said. “Yet many businesses do not know that we pay it at all.”
The tax may also affect employee wages and the amount that businesses can donate to charities or festivals for the community, Macklin said.
The tax extends to rental homes and to some nonprofits, such as the Worthington Area Chamber of Commerce. It forces the organization to increase membership fees and rethink how much it can invest into local events, she said.
Pumarlo is hopeful a form of tax relief for businesses will be passed this legislative session.
“We hope that there will be debate and discussion to bring meaningful state tax relief,” he said. “We want to retain (Minnesota businesses), and we want them to expand in Minnesota.”
The Minnesota Chamber of Commerce also hopes the House and Senate will pass a long-term plan to finance transportation investments from the general fund.