Minneapolis to consider new ways to tax residents
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Illustration: Sarah Grillo/Axios
Minneapolis leaders are mulling new ways to tax city residents.
Why it matters: With rising costs and cratering commercial values, Minneapolis homeowners have been hit with hefty property tax increases, prompting some officials to explore new revenue streams.
State of play: A consultant hired by the city presented five new mechanisms to raise revenue to council members and the city's Board of Estimate and Taxation yesterday.
- That consultant, Guidehouse, published a report last fall, but this one has more detailed projections.
Zoom in: Here are those options.
💰 An income tax of 1% or 2% that would raise $291 million to $410 million a year.
🏡 Real estate transfer tax: This would tax property sales at a rate of 1.5% to 3.6%. That would mean, for example, if you sold a home for $400,000, you would pay between $6,000 and $14,400, depending on the rate.
- That would raise $101 million to $159 million a year, per the report.
🏫 Payment in lieu of taxes: Nonprofits that are exempt from paying property taxes could voluntarily make payments for the city services they receive.
- Estimated annual revenue: $10 to $19 million.
🏚️ Empty homes tax: Paid by residential and commercial properties vacant for more than six months.
- $6 million to $12 million per year.
🪧 Outdoor advertising tax: Utilize public assets for outdoor advertising space and tax it.
- Revenue unknown.
Context: The city's property tax levy this year is $538 million, so some of these proposals would be a massive increase in collections for the city.
- Board of Estimate & Taxation member Steve Brandt raised the idea of an income tax last year, when residents were facing another steep property tax hike.
- He told Axios he would prefer to pursue a smaller 1% income tax only on households making more than $200,000. That, he said, would generate $40 to $50 million a year, and his hope is that it would coincide with a curb on rising property taxes.
Reality check: Almost all of these ideas would require approval from the Legislature, which would be an uphill battle.
- One possible lower-hanging fruit is expanding the city's downtown liquor, lodging, and restaurant tax to the entire North Loop, but that has also stalled in the Legislature.
What they're saying: "The mayor is supportive of adjusting the downtown taxing boundary," a spokesperson for Mayor Jacob Frey said in a statement.
- "At the same time, we've got to strike the right balance — making sure any new ideas work for residents and businesses in Minneapolis. He'll take a close look at the report and continue digging into next steps."
- Brandt and some council members said they wanted to know more about how an income tax could lead to out-migration from the city.