A Minnesota Republican tax priority is lowering and eventually eliminating a statewide property tax on businesses, but Democrats say they are funding the tax cut with money from poor, disabled and elderly renters.
A bill the House Taxes Committee debated Tuesday produced widely varied reactions, punctuated by businesses saying it is good policy to cut their taxes.
Tom Hesse of the Minnesota Chamber of Commerce said the state’s business property tax ranks among the country’s highest.
“We look at this as a competitive issue,” said Jill Larson of the Minnesota Business Partnership, adding that high taxes drive business to other states.
On the other hand, Democrats complained that lowering business taxes is made possible in House Tax Chairman Greg Davids’ bill by reducing existing property tax refunds for renters.
Debate on the bill will continue next week, Davids, R-Preston, said.
The bill received widespread business support for eliminating taxes on the first $150,000 value of business property, which would lower property taxes for nearly all businesses.
While businesses also liked the phasing out of the statewide business property tax over several years, city leaders and Democrats said they worry that the bill does not replace lost tax money.
The Davids bill also would freeze Local Government Aid payments.
A future bill Davids plans would freeze property tax levies.
Republicans say helping businesses means they can hire more workers. However, Rep. Melissa Hortman, DFL-Brooklyn Park, said provisions such as lowering renter refunds are hurting the public.
“We need to stop dinging customers,” she said.
The Davids bill would take money out of people’s pockets, Hortman said, so less is available to spend at businesses.
The proposal calls for cutting $70 million out of the renters’ property tax refund program next year.
Davids, however, said that the existing program refunds more money than the amount of property taxes included in tenants’ rent. He said his plan balances their refunds with what landlords pay in property taxes.
Rep. Paul Marquart, DFL-Dilworth, complained that the year’s major tax bill does not replace a homestead tax credit that the Legislature and Gov. Mark Dayton eliminated last year.
Many local officials say they were forced to raise local property taxes because eliminating the credit cut $292 million from their budgets.
Marquart complained that eliminating the credit resulted in eight times higher property tax increases in rural Minnesota as in the Twin Cities.
Davids said when the bill comes in front of his committee again next week, he expects to offer amendments.
“It will change a lot,” he said, but the homestead credit will not return “as long as I have anything to say about it.”