Calls made to change property tax that doesn’t stay local

Owners of commercial, industrial or seasonal recreation property have another layer to their real estate taxes. Known as the general levy tax, it began in 2001, and unlike property taxes that fund local governments, this tax revenue is deposited in the state’s General Fund.

Over the years, there have been unsuccessful attempts from both sides of the aisle to phase out the tax, but this year, supporters are hopeful that the state’s projected $1.4 billion surplus will be the catalyst for change.

Rep. Dale Lueck

The House Property Tax and Local Government Finance Division heard five bills Wednesday, proposing different phase-out mechanisms; all were held over for possible omnibus bill inclusion.

The tax contributes about $1.8 billion each biennium to the General Fund, with 95 percent of the tax being paid by the commercial/industrial sector and 5 percent paid by owners of seasonal recreational property.

Rep. Dale Lueck (R-Aitkin) sponsors HF12. While not eliminating the tax, it would significantly reduce the amount collected and do away with the annual inflator.

“This thing has almost roughly doubled since its inception; it would reset the levy back to what it was: $629 million. From here and after, the Legislature would have to levy the tax annually. If you’re going raise it, you have to vote on it,” he said.

The companion, SF51, sponsored by Sen. Carrie Ruud (R-Breezy Point), has been referred to the Senate Taxes Committee.

Rep. Steve Drazkowski

Sponsored by Rep. Steve Drazkowski (R-Mazeppa), the division chair, HF726 would phase out the tax over six years. An advocate for complete repeal of the tax, Drazkowski said he understands the need for financial caution. The bill’s companion is SF867. Sponsored by Sen. Carla Nelson (R-Rochester), it, too, has been referred to the Senate Taxes Committee.

“This is a very oppressive tax that businesses are forced to pay, on top of the payments they already make for city, county and schools. This bill would remove that 25 to 35 percent additional property tax that they pay directly to the state of Minnesota that never touches home,” Drazkowski said.

Changes to the general levy are not under consideration by the governor, said Paul Cumings, tax policy manager for the Department of Revenue. “Bills to repeal or phase-out the general levy, could put the state’s fiscal health at risk.”

He said the governor’s approach to tax relief would be more well-rounded and a balanced package of relief.