Richard Nixon was president, Three Dog Night’s “Joy to the World” was the most popular song and “Billy Jack” was the biggest grossing movie of the year. While 1971 might not have been the political and cultural apex of American society, it was a year with positive developments, including the opening of Disney World, the voting age was lowered to 18 and in Minnesota, there was the passage of the Fiscal Disparities Act.
The Act established a program whose goal was to promote fiscal equity by creating a more level distribution of fiscal resources (commercial property taxes, industrial property taxes and public utility property taxes) among the taxing jurisdictions in the metro area.
Sharing the wealth
Since 1971, those 179 jurisdictions have shared a portion of the growth in the commercial, industrial and public utility property tax base that’s a primary source of revenue for cities to foot the bills for the services they provide.
Over the decades, the program has gradually reduced differences among those taxing jurisdictions in the commercial-industrial tax base.
Reduces competition
The Met Council says the program reduces incentives for the jurisdictions to compete with each other for tax base and that it promotes “more efficient development, enabling more cost-effective regional services such as wastewater treatment and transit services.”
Minnesota state tax analyst Steve Hinze says that a few years ago, his office calculated a “what if the Fiscal Disparities Act had never been created” scenario.
Up to 10 percent lower for some
He said that if the program didn’t exist, commercial and industrial property taxes would be up to 10 percent higher in the communities that are the biggest net recipients and that those taxes would be 5 percent to 10 percent lower in the biggest net contributor communities.
The Met Council says that when it calculates the ratio of highest to lowest commercial/industrial tax base per person, it’s 14 to 1 among communities of 10,000 residents and up without the program’s tax base sharing. When that tax-base sharing is factored in, the gap shrinks to 6 to 1.