A few weeks ago I wrote about the hypothetical tax burden for a $414,000 home in a selected number of Hennepin County cities. I got some good feedback from that posting. One of the replies I received asked what the tax burden would be if the hypothetical property were a business rather than a home. Good question. So I sat down today with the Eden Prairie City Assessor, Mr. Steve Sinell, to discuss that question. Steve came up with the following tax burden data that I think is very interesting.
The example I’ll use is for a residential home valued at $3,000,000; and apartment building valued at $3,000,000; and a commercial business valued at $3,000,000 for taxes payable in Eden Prairie in 2006. Here are the numbers:
The $3,000,000 residential homeowner would pay $36,507.92 in total property taxes. Of this total, $9,165.90, or 25.11%, would go to the City. Hennepin County would get $12,472.50. The Eden Prairie School District would get $12,159.90. Other minor taxing bodies pick up the rest.
For the $3,000,000 apartment building owner would pay $44,065.65 in total property taxes. Of this total, the City gets $11,307.98 (25.6%), Hennepin County gets $15,590.63, and the School District gets $13,898.93. The City, County, and School District take 92% of the taxes from this taxpayer, and several other minor taxing bodies get the rest.
The $3,000,000 commercial business owner will pay $100,595.97 in total property taxes. Uff da. Of this total, the City gets $11,421.01 (11.3%), the County gets $15,742.06, and the School District gets $13,983.38. The taxes received by the City, County and School District in this example are remarkably similar to what the same three taxing bodies receive from the residential homeowner and the apartment building owner. However, in the commercial business example, the City, County, and School District’s taxes only comprise 41% of the total tax burden.
The biggest share of the tax burden for the $3,000,000 commercial business taxpayer in Eden Prairie, Minnesota is imposed upon him/her by the State of Minnesota. The State’s General Property Tax, which residential properties do not pay, costs this business taxpayer $30,115.00 in 2006. Coming in a close second for the commercial business taxpayer is his/her contribution to the State’s Fiscal Disparities Program, which for this hypothetical $3,000,000 business owner is $26,048.28 in 2006. So between the State’s General Property Tax and their Fiscal Disparities Program, the state government’s fiscal burden on this taxpayer is $56,163.28, or 56% of this taxpayer’s total tax burden. Or, looked at another way, about five times the tax burden put on this particular taxpayer by the City of Eden Prairie.
Keep this tax burden relationship in mind the next time you hear a State elected official decry the tax burden put on businesses by cities, counties and schools. Now you know where the real burden comes from.
