Our Opinion: Drop the business property tax inflator
Gov. Mark Dayton and the Legislature are headed toward this session's finish line with a lot of work left to do and, so far, not a lot of agreement on how to do it.
One of those areas is tax relief. While Dayton, the House and the Senate all have differing ideas on how taxes might be reduced in light of the $1.65 billion surplus, we hope they can all agree to what we feel would be a correction on the business property tax.
The business property tax, started in 2002, is levied on businesses on top of the taxes they already pay to school districts, cities and counties. The business property tax accounts for about 30 percent of a business' tax bill.
Unlike most other tax rates, which are decided upon each year, the business property tax comes with an automatic inflator, meaning the tax has gone up every year since its inception, from about $585 million in 2002 to $863 million in 2016.
"The most onerous part of this is it's on autopilot and we don't think any part of government should be on autopilot," said Jim Pumarlo, director of communications for the Minnesota Chamber of Commerce, during a visit with the Dispatch Editorial Board.
Joining Pumarlo was Lisa Paxton, a Minnesota Chamber of Commerce board member and small business owner in Baxter. Paxton, whose Baxter business is valued at $270,000, said her taxes were $7,558 per year. A Baxter home of similar value only paid $3,200 a year, she noted.
Paxton questioned how small businesses like hers are expected to expand and add new employees while dealing with rising costs in all areas, especially with the business property tax that increases every year.
"I struggle with that as I don't receive any more services," Paxton told the Dispatch Editorial Board. "It's difficult to think about improving that property. I'm not interested in expanding."
We agree the tax is unfair to business owners. While the Minnesota Chamber of Commerce would like to see the business property tax abolished altogether, we think a more prudent start would be the elimination of the inflator followed by a yearly look at the state's budget to determine if the business property tax—or any tax for that matter—warrants a decrease.
Small businesses, certainly in the Brainerd lakes area, are still the heart of our state's business community and we should do what we can to feasibly support their growth. Removing the inflator, which increases the tax statewide by about $40 million per year, is one small area where we could start. We hope state legislators agree.