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Minneapolis pays 3 times more than it receives in state funds, new report says

This report comes as state lawmakers are debating proposals opponents say would "bail out" the state's largest city.

Minneapolis residents pay more than triple in state taxes compared to how much they receive back in aid from the state, according to a new report commissioned by the Minneapolis Regional Chamber of Commerce.  

The report, compiled by the firm MacCallum Ross for the Chamber and released Thursday, says Minneapolis generates 3.5 times more in tax revenue to the state than it receives back in aid. 

In 2017, Minneapolis sent the state $1.97 billion, mainly coming from income, corporate and sales taxes, while it received $536 million in state aid, with $400 million of that going to schools and $78 million going to Local Government Aid. 

The taxes Minneapolis paid to the state compared to how much it received in state aid in 2017.

The taxes Minneapolis paid to the state compared to how much it received in state aid in 2017.

"Minnesota has an interconnected economy, where all regions contribute to and support the success of one another,” said Minneapolis Regional Chamber President and CEO Jonathan Weinhagen in a statement. “However, the data in this report makes it clear that, from a revenue perspective, those contributions are not equivalent. 

"Minneapolis pays more than 3.5 times in taxes to the State than it receives in aid payments. We are hopeful that this data-based report will provide useful information to policymakers as they consider investments to support small businesses in Minneapolis," he added.

The report looks at state tax collection and spending only, and not the amount Minneapolis sends federal tax collectors and receives back for programs such as Medicaid and MinnesotaCare.

The timing of the report is quite pertinent, coming as lawmakers at the state Capitol are debating proposals that would provide aid to Minneapolis.

One is a $300 million plan ($200 million for Minneapolis, $100 million for St. Paul) that would help businesses damaged in the civil unrest following the death of George Floyd (double what Gov. Tim Walz had suggested) has advanced in the Democratic-controlled House, the Pioneer Press reported last week.

Republicans have criticized the amount, saying it's too much, and have said state tax dollars shouldn't be used to "bail out" Minneapolis and St. Paul.

Another House proposal would create a $35 million account (SAFE Fund) to reimburse law enforcement for costs related to safety precautions being taken in Minneapolis for the trial of former Minneapolis Police officer Derek Chauvin, who is charged in Floyd's death. His trial is scheduled to begin on March 8. 

However, the Republican-controlled Senate has a competing bill that instead would make Minneapolis be responsible for paying the bill, KARE 11 reports. Republicans who are opposed to the House proposal have expressed concerns about Minneapolis City Council members' push to defund/dismantle the MPD. Some DFLers have expressed similar concerns.

“The notion that the rest of the state is 'bailing out’ Minneapolis is inaccurate. To recover from the current economic downturn, Minneapolis needs a strong Minnesota and Minnesota needs a strong Minneapolis," Weinhagen said. 

The Chamber's report notes that since 2004, Minneapolis, Hennepin County and the seven-county metro have paid out more in taxes than what the area has received in state aid, while greater Minnesota consistently receives more state aid than what is paid to the state.

The Chamber says investments in Minneapolis' recovery, especially for small businesses amid the COVID-19 pandemic, is critical because "without a strong Minneapolis our state will not be well-positioned to recover from this economic crisis." 

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