U.S. Property Tax Association, Inc.


Text To: 612-735-1985

Fighting For The Underdogs In Commercial Property Tax Appeals

The interplay of residential and commercial property tax rates

On Behalf of | Sep 30, 2020 | Commercial Property Tax Appeals

As Twin Cities metro area commercial property owners know, government officials and taxing bodies are confronted with a variety of difficult questions and challenges as they wrestle with setting tax levels for both business and residential properties.

A real estate publication recently posed and explored one of those questions: “would the increase of commercial property taxes in an area impact — or offset — the need to increase residential property taxes?”

Effect of a commercial property tax hike

A business law attorney told Mansion Global that when government bodies decide that spending needs require more revenue, an increase in commercial property tax rates could, at least in theory, make it unnecessary to also raise the residential property tax rate.

He said many municipalities “budget for a particular tax amount that they need,” and then “they’re looking at [property] values” and tax rates. The property values help tax authorities set tax rates so that they’ll collect the tax revenue for which they’ve budgeted.

Different classes, different rates

He noted that some taxing bodies have variations on that process, including different property classes subject to different tax rates.

The attorney said that in the near future, it appears that the question of using commercial property tax rates to alone shoulder increased revenue needs is likely moot. He expects decreases in commercial property tax rates in 2021 due to the effects of the pandemic.

In the Twin Cities area, extensive damage to commercial properties is expected by many to result in downward property valuations.

The business law attorney also said he thinks it’s likely that residential values will rise next year.

Tax and spend possibilities

He speculates that some governments will wind up slashing budgets to avoid property tax increases, while others might well maintain or even increase both spending and tax rates.