Capitol View: June 8, 2012 Archive

PoliGraph: Dayton claim gets tax numbers right

Posted at 2:00 PM on June 8, 2012 by Catharine Richert (4 Comments)
Filed under: PoliGraph

One of the DFL's election year messages can be summed up like this: Republican legislators didn't do much this session, and what they did accomplish benefited businesses, not individuals.

At the party's state convention last weekend in Rochester, Gov. Mark Dayton tested that message on a crowd of delegates by talking about a tax bill he vetoed in May.

Republicans "have been claiming all over the state now that their bill would have helped business to add jobs," Dayton said during his speech, referring specifically to a one-year business property tax cut in the legislation.

"The Minnesota Department of Revenue found that a business with less than $150,000 worth of property, which is almost half the businesses in our state, would have received a property tax cut of - are you ready for this? - $27. A larger business with $1 million in property would have received a $228 reduction. Now, can't you just see the explosion of hiring that would occur when Minnesota businesses took their $27 or $228 to the job market?," Dayton said.

Dayton's correct that the property tax cut would not have created much in the way of savings.

The Evidence

This year, Republicans authored two tax cut packages, which included things like sales tax exemptions on business equipment purchases, bigger tax credits for small business investments, and economic development projects.

Republicans said the packages would help spur job growth.

"It's all about jobs, and this bill creates more jobs than the Vikings stadium and the bonding bill combined," said Rep. Greg Davids, R-Preston, chair of the House Tax Committee, about the second version of the legislation.

Dayton vetoed both bills, saying he didn't want tax cuts or spending increases that widened the state's deficit, and because he felt that the bills favored businesses over homeowners.

In his speech at the DFL convention, Dayton focused on a provision that would have eliminated an expected 2.3 percent increase in the state business property tax from 2012 to 2013. He wrote in a May 14 veto letter that the cut did not produce enough revenue to justify the $46 million cost to the state's general fund.

The Minnesota Department of Revenue looked at how freezing the property tax increase for one year would affect properties of different value.

- The owner of a $150,000 commercial property would save $27 in taxes.
- The owner of a $1 million commercial property would save $228 in taxes.
- The owner of a $10 million commercial property would save $2,364 in taxes.

Dayton left out the last example in his speech, which represents the very high end of what businesses could have saved under the GOP property tax proposal.

But it's important to note that only 1.75 percent of the state's commercial properties - or about 2,200 properties - are valued at more than $5 million, according to the revenue department. That means very few businesses would have gotten the maximum tax cut.

The revenue department says that most of the state's commercial properties are far less valuable. Roughly 44 percent are valued at less than $150,000, and 30 percent are valued at between $150,000 and $500,000. That means most commercial property owners in the state would likely have seen less than $228 in tax savings.

The Verdict

It's possible that business owners would have reinvested their property tax savings in jobs as the Republicans hoped they would. And we'll never know if the rest of the Republican's tax package would have spurred job growth in the state.

But for his part, Dayton accurately characterized the estimated property tax savings the bill would have created. As a result, he earns an accurate for this claim.

SOURCES

Gov. Mark Dayton, speech, Minnesota DFL Convention, June 2, 2012

Gov. Mark Dayton, Veto Letter HF 247, May 14, 2012

Minnesota Public Radio News, Dayton defends veto of GOP-sponsored tax bill, by Tim Pugmire, May 15, 2012

Minnesota Department of Revenue, State Property Tax One-Year Inflation-Adjustment Freeze, by Eric Willette, Property Tax Research Director, May 8, 2012

E-mail exchange, Katharine Tinucci, spokeswoman, Gov. Mark Dayton, June 7, 2012

E-mail exchange Ryan Brown, media coordinator, Minnesota Department of Revenue, June 7, 2012