Last week we looked at the Price of Local Government from the Property Tax perspective, which considered the relationship between personal income and property taxes paid by individuals and business residents living in Cook County.
We substantiated the claim that Cook County residents pay a lower percentage in property tax than 80 other counties in the State of Minnesota.
This week we consider the amount of tax revenues generated by “tax exporting”– collecting tax revenues from nonresidents or visitors to the area, which, in effect, exports government costs to people who cannot vote for or against those imposing the taxes.
Local governments can easily export three taxes directly to non-county residents: cabin property taxes (billed directly to owners who live elsewhere), lodging taxes (billed directly to visiting hotel/ motel guests), and local sales taxes (billed directly on sales to out-of-town purchasers).
To make these calculations for all 87 of Minnesota’s counties the following assumptions were made: . Local sales taxes: According to the Minnesota Center for Fiscal Excellence (MCFE), approximately 30 percent of local sales taxes are paid by out-of-state residents or Minnesota residents who live outside the county where they make the purchase. In Cook County previous studies, conducted locally, would indicate this figure to be closer to 70 percent. . Cabin property taxes: According to the MCFE, an estimated 80 percent of total local cabin property taxes are exported to non-county residents (out-of-state residents and Minnesotans who live outside the county where their cabin is located). . Local lodging taxes: Given the nature of lodging, the MCFE assumes 90 percent of local lodging taxes are paid by individuals living outside the county where the hotel collecting the tax is located. In Cook County lodging taxes collected amounts to roughly a million dollars annually with the majority of these dollars (63 percent) coming from the Lutsen-Tofte area; Grand Marais area contributes 25 percent and the Gunflint Trail area 12 percent. All but about $250,000 of these exported taxes are diverted to the local tourism bureaus.
Although local governments export on average 7.5 percent of Own Source Revenues (OSR) (all state and local revenues less “intergovernmental revenues” – grants from one unit of government to another) the ability to export tax burdens varies significantly around the state. In 30 counties, local governments can export only 4 percent or less of OSR while in 17 counties exported taxes represent over 10 percent of OSR – and over 20 percent in four cases (Cook, Cass, Crow Wing and Aitkin).
As these statistics reflect, places with the highest proportion of exported taxes are largely tourism dependent areas and/or counties with a high proportion of cabin property.
According to 2014 figures, Cook County ranked highest in the state at 29.4 percent total exported taxes, up from second highest in the state in 2013 at 26.9 percent. By comparison, in 2014, Lake was at 14.7 percent and St. Louis at 10.4 percent; the lowest county was Kittson (far NW corner of the state) at 0.9 percent.
So, what does 29.4 percent in exported taxes amount to in dollars and cents? The MCFE estimates $5.3 million in total cabin taxes collected in Cook County in 2014 and assumes about $4.3 million of this is exported to those who own cabins but live outside the county. Add to this figure the revenues generated from local sales taxes and local lodging taxes and we are approaching $5 million in exported taxes paid by those living outside the county.
Cook County benefits, to a greater degree than any other county in the State of Minnesota, from tax revenues exported to those living outside the county.
Next week we will consider Perspective Three: Cash Income Price of Local Government – all revenues collected within the county.
I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents.
–James Madison
Former Cook County Commissioner Garry Gamble is writing this ongoing column about the various ways government works.
Leave a Reply