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Businesses hit hard: State shifts tax burden to local gov't

There should be signs on highways coming into Minnesota that read "Watch Out for Rising Property Taxes."

In Becker County, property taxes will rise 6.35 percent across the board, unless the county board acts to cut the budget by that amount.

Cities, school districts and other taxing entities are in the same boat.

Businesses will be especially hard hit by higher property taxes. Along with nonhomestead property owners, they will bear the brunt of a tax shift engineered by the Legislature in the recent special session.

The Legislature eliminated the county's $2 million Market Value Credit payable in 2012. Half of that has been used by the county to keep property taxes down, the other half has been used by other taxing entities within the county to keep property taxes down.

This year's agricultural tax credit of about $364,000 will not change much.

State lawmakers helped solve the $5 billion budget shortfall by eliminating the Homestead Tax Credit, which has long given a tax break to owner-occupied homes.

To protect homeowners from the full blow, it also gave them an exemption, although taxes will likely rise for homeowners as well. Farmers were also protected through the agricultural credit to counties to help keep their taxes down.

But the state's property tax system is a bit like a water bed -- if you push down one area -- lower taxes for homeowners, for example -- the mattress rises somewhere else -- in the form of higher taxes for businesses.

"The homestead credit exemption will 'push up' taxes on businesses and non-homestead properties," County Auditor-Treasurer Ryan Tangen told the county board Tuesday. "It's very unfortunate being that we're trying to get our businesses up and running from the recession."

It would have been better for business and commercial property owners if the Legislature had not provided an exemption to protect homeowners, Tangen said.

"Maybe they should have stepped away from the market credit (exemption). If they had said we can't afford it, we're just going to step away from it."

Becker County is fortunate in that it is in better financial shape than perhaps 90 percent of Minnesota counties, said Board Chairman Barry Nelson. It has a good economic mix, a growing population and the county board has been very careful with spending.

"Can you imagine in these small agricultural counties -- it will break those small businesses --it will break them," Nelson said.

"We have been so proactive over the years," Tangen said. "It's been very important to the board that we balance the county's needs with how it's going to impact others."

Commissioner Larry Knutson pointed out that the county board could potentially cut spending to avoid the 6.35 percent increase.

"Right now a real in-depth budget discussion is not possible," Tangen said. "The Department of Revenue has not had the chance to hammer out what changed in the special session."

An explanation of the state's tax shift will be included in information mailed out with property tax statements in Becker County.