Goal to Uncover the Drivers Behind Property Tax Rates

According to the Tax Foundation’s index of Major Components of the State Business Tax Climate for fiscal year 2011, the state of Minnesota ranks 18th in the property tax burden it imposes on its taxpayers. When all taxes are considered, Minnesota came in 43rd out of the 50 states. Of the $554 billion businesses across the U.S. remitted in state and local taxes in 2006, 37 percent, or about $205 billion, was for property taxes, the Tax Foundation reports.

A group called Open Government Minnesota (OGM) is lobbying “to provide access to all data needed to create and support the development of a more open and vigorous public discussion surrounding the restructuring of local government, with the goal of delivering public services more effectively, efficiently, and at a lower cost to property taxpayers.” Behind the initiative are two organizations: NAIOP Minnesota, a commercial real estate development organization, and the Minnesota Taxpayers Association.

A key component of OGM is the proposal that “communities across the state adopt standardized and uniform financial reporting by ‘object code’ — providing information on spending for specific items such as salaries and wages, health benefits, office expenses, fuel, utilities, maintenance, professional services and the like,” according to an April press release from OGM. The release notes that local budgets often report spending only under broad categories, such as parks or police. That makes it difficult for both corporate and individual taxpayers to identify just how their tax dollars are being spent.

Instead, the group would like to see more detailed lists of expenses for each municipality, including salaries and wages; health, retirement and other benefits; office supplies; operating supplies; professional services, communication services; capital equipment and debt service. Open Government Minnesota says all cities and counties with populations of 2,500 or more should report their spending by both functional area and by object code. The group also advocates publishing key features and details of public employee contract provisions, including details on government-paid health plans, wage agreements and cost of living adjustments.

While this level of reporting would seem to require wholesale changes in the ways in which local governments account for their spending, the Office of the State Auditor already offers a Uniform Chart of Accounts designed for cities and towns, and school districts provide this information on the Department of Education’s website, according to FAQs prepared by Open Government Minnesota.

Most businesspeople that have been involved in budgeting will be familiar with object code reporting, as it consists of about the same level of detail as many companies require within their financial statements. While taxpayers, including businesses, and elected officials can debate the proper levels of taxes, having a good understanding of the ways in which tax dollars are spent should be an idea on which all sides agree.