WILLMAR -- The chairman of the House Taxes Committee says proposed repeal of the statewide business property tax is a top-tier tax relief priority of the House Republican caucus because counties should not be collecting state tax dollars.
The statewide business property tax was implemented about 10 years ago because a former top Democratic senator said that businesses don't pay enough property taxes, said Rep. Greg Davids, R-Preston, House Taxes Committee chairman.
Davids, who spoke Tuesday in Willmar, was quoting the senator from a news story published 10 or 11 years ago in the Minneapolis Star Tribune.
"I don't think that local units of government -- counties -- should have to collect state tax dollars,'' Davids said in an interview following informal remarks to members of the Little Crow chapter of the National Association of Insurance and Financial Advisors.
"In the business property tax statement, it says statewide business property tax,'' said Davids, himself a financial planner.
Davids, who announced the tax relief proposal on Monday, said the tax would be phased out over 20 years and save about $800 million, beginning with $80 million in 2012.
"A motel in a small town in outstate Minnesota paid $12,000 a year for the statewide business property tax. It's a lot of money and the county has to collect and gets yelled at because people pay for it in their property tax,'' he said.
"It is a top-tier priority for business tax relief and property tax relief of the House Republican caucus for 2012,'' he said.
Davids also spoke in favor of the 2011 Legislature's repeal of the homestead market value credit, replacing it with a new homestead market value exclusion. The last year of the credit is for property taxes paid in 2011 and the exclusion begins for property taxes payable in 2012.
The credit showed up on an individual's tax statement as a subtraction, and that amount was to be reimbursed to the local taxing entity by the state.
Davids said the Legislature got rid of the credit, which was supposed to reimburse cities and counties for property tax relief, because the system was broken. He said the system paid one out of 10 years in full, was dishonest and needed to be replaced.
"We're not getting rid of the homestead. We're getting rid of a credit that was given to counties and cities and it was to be $261 million this last year and we paid $81 million in 2011. How can state government continue to support a program that they (the state) are not supporting, not paying?'' he asked.
"What we did at the advice of the League of Minnesota Cities and various county organizations: they said get of this. It's not working. It's a scam. So we did and to (Gov. Mark Dayton's) credit, he could see it that it was a program that wasn't working and so we got rid of it,'' Davids said.
According to information from the Minnesota House Research Department, the homestead market value exclusion provides for a portion of each home's market value to be excluded from its value for property tax calculations.
"We are really targeting money to people, not to units of government,'' Davids said. "So the homestead credit goes to people. The statewide business exclusion goes to business, not to government, for them to decide. It's for the business owners to put money back in their pockets, homeowners to put money back in their pockets so they can decide what to do.''