2010-03-23_PWETC_AgendaPacket - Laserfiche WebLink

Home

Background Relative to other states, Minnesota's local governments are significantly more dependent on local property taxes, less so on local sales and use taxes. Table 1, below, shows that in fiscal year 2000, the local property tax in Minnesota accounted for 94.2 percent of all local tax revenues, and 47.1 percent of revenues from all sources. This compares to 71.6 percent and 44.2 percent, respectively for all states. In contrast, Minnesota local sales and use taxes accounted for 2.8 percent of all local taxes and 1.4 percent of total revenues, compared to 17.2 percent and 10.6 percent, respectively for all states. Today, general local sales taxes exist in only 10 of Minnesota's 853 cities, and in only one of our 87 counties-Cook County. Table 1 Local dependence on major taxes-how do we compare? Major /oca/ taxes as a percent of /oca/ taxes and revenues -FY2000 Taxes All revenue Tax type Minn. All states Minn. All states Property 94.2 71.6 47.1 44.2 Sales and Use 2.8 17.2 1.4 10.6 Income 0.0 5.1 0.0 3.2 Corporate Franchise 0.0 1.1 0.0 0.7 Motor Vehicle Sales 0.1 0.4 0.0 0.2 Other taxes 2.9 4.6 1.5 2.9 Total 100.0% 100.0% 50.0% 61.8% State policymakers have been reluctant to provide broad authority for local-option sales taxes or other local revenue sources out of concern over the uneven distribution of revenues across communities. Other policy concerns about administrative and compliance costs, accountability, inter-jurisdictional competition, and fairness might explain this reluctance to provide broader local revenue- raising authority. The 2003 mandate to which this report re- source: u.s. census Bureau sponds is the latest attempt to review the policy and implementation aspects of granting expanded local sales authority. The many policy issues surrounding general or project-specific local sales tax expansion will be described in this report. Current Local Sales Taxes in Minnesota Scope and Structure Minnesota has 11 local general sales and use taxes, and 19 special local sales taxes (i.e., taxes on specific commodities).4 Minnesota is notable for the relatively few authorized local sales and use taxes that have been implemented. A statutory prohibition on local sales and use taxes enacted in 1971 (MS. 477A.016) provides that "No county, city, town or other taxing authority shall increase a present tax or impose a new tax on sales or income:' Current law allows cities to adopt transient lodging taxes of up to 3 percent if the proceeds are used for tourism promotion (M.S. 469.190). More than 60 cities and towns imposed this tax in calendar year 2001, collecting revenues of approximately $8 million statewide. Cities also have statutory authority to impose utility franchise fees. This report does not review local tourism taxes or utility franchise fees. While only 10 of Minnesota's 853 cities and one county impose general sales and use taxes, approximately 20 percent of the state general sales tax base (including automobiles) is now subject to a local general sales tax-because these jurisdictions cover approximately 16 percent of the state population and 24 percent of the total statewide commercial/industrial tax base. The remainder of this section provides information on eight aspects of local sales taxes outlined in the 2003 legislation mandating this study. 4. See Appendix C for a complete list of local sales taxes.