In a move designed to stoke the state's fragile economic recovery, Minnesota Republican legislators are pushing hard on a proposal to phase out statewide business property taxes, largely by reducing a rebate to renters.
House Republicans want to wind down the state's business property tax over the next 12 years, potentially saving businesses $800 million a year.
"It sends a message to the job providers that we want you here, we want you to create jobs here, to expand your businesses here, to be successful," said Rep. Greg Davids, chairman of the House Taxes Committee.
Republicans who control the Legislature have made phasing out the business property tax a top priority and are likely to pass some form of business tax reductions this year. They said the state's business property taxes have become a drag on local businesses and deter other companies from relocating to the state.
Many Democrats say the change is reckless and takes money from renters to give breaks mostly to businesses located in the Twin Cities but often with headquarters in other states. They say the tax breaks could leave the state more than $1 billion short in future budgets, possibly forcing the state into more higher-interest borrowing like the kind it used to patch up the budget last summer.
"This is wrong and offensive," said Rep. Melissa Hortman, DFL-Brooklyn Park. "We are taking more money out of people's pockets who would be shopping at these businesses."
The proposal exempts the first $150,000 in value from commercial and industrial property next year. The dozen-year phase out of business property taxes would begin in 2014.
Minnesota is one of only about a dozen states with a statewide property tax. State leaders first imposed the tax in 2001 when the state took on a larger share of public school costs and provided across-the-board property tax relief.
To help pay for business tax cuts, Republicans would lower the renters rebate from 17 percent to 15 percent, trimming the average refund about $221. The proposal also would lower the maximum allowable income to $40,000, eliminating about 74,000 renters from the program.
State leaders created the renters rebate program as a way to refund a portion of rent for those with modest to low income. Davids, R-Preston, called the rebate program "very generous."
It is highly unlikely DFL Gov. Mark Dayton would sign such a bill. The governor has staked out his own initiatives to improve the state's economy, but he's been reluctant to trim the renters' credit or other programs that help low and moderate income Minnesotans.
Baird Helgeson • 651-222-1288