Budgeting and Forecasting, Economic Development

Taking Another Look at Tax-Base Sharing

July 2021 will mark the 50th anniversary of pioneering legislation in Minnesota to address fiscal implications of metropolitanism. The law— which adjusts for differences among municipalities in the commercial/industrial (C/I) property tax base without sacrificing local control, increasing taxes, or moving functions to higher levels of government—continues to attract interest across the nation. Similar actions are rare, however, and none is as far-reaching as Minnesota’s.

The law pools 40 percent of net growth since 1971 in the C/I property tax base among some 190 municipalities in the Minneapolis-St. Paul metro area. The pooled valuations are immediately redistributed back to the 190 municipalities, according to population modified inversely by tax wealth. Among municipalities with populations of more than 9,000, the wealthiest municipality without the law in 2020 would have 13 times the per capita C/I base as the poorest, or 13 to 1. With the law, the ratio is 6 to 1.

This article provides an overview of the Minnesota plan and highlights other similar agreements from around the United States.

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