NEW ULM – The state will have about $1.2 billion in surplus funds at the end of the current biennium, perhaps more depending on the upcoming February forecast.

With that kind of surplus, lots of people have lots of ideas of how to spend it. The Minnesota Chamber of Commerce is no different.

The Chamber, along with the United for Jobs Coalition in Minnesota, is proposing a tax relief measure that would benefit all businesses in the state – reducing the business property tax that all businesses pay to the state.

Jim Pumarlo, communications director for the Minnesota Chamber of Commerce, said in New Ulm on Thursday that businesses, like homeowners, pay local property taxes levies by cities, counties and school districts. But they also pay a statewide property tax levied only against businesses and cabins in the state. This tax, which goes directly into the state’s general fund, represents about 30 percent of a business’ property tax bill.

All businesses pay this cost, whether they record a profit or a loss, said Pumarlo. And since the tax has an automatic inflation escalator, it goes up every year, putting a bigger demand on businesses.

The tax generates about $856 million a year, with businesses paying about 95 percent of the tax, and cabin owners paying the other 5 percent.

Pumarlo said there are only 10 states in the U.S. that charge a statewide property tax, and Minnesota is the only one that levies it specifically against businesses.

Jerry Kauffman, president of Windings, Inc., in New Ulm said that the tax creates a “headwind” that Minnesota businesses have to contend with to be competitive.

Kauffman said Windings, like any company works to deal with fixed and variable costs, controlling those that it can control. It must deal with a competitive climate where its customers expect prices to go down.

“So we have to reduce costs just to hold our own. If we have parts of our fixed costs that are staying the same, or worse yet going up, it puts more pressure on our variable costs, which in our business as in many businesses tends to revolve around staffing.”

Heather Baimbridge-Cox, from Windings, said the state property tax rate in 2008 was 2.8 percent of Windings’ property value. “This year, it will be 5.8 percent. So in eight years it increased 102 percent, just in the rate. One hundred and two percent is quite an increase in eight years. I wish our profits and sales increased at that same rate. So it more than doubled in that time frame. I don’t know what it will be in eight years if it continues to increase at the same rate.”

Pumarlo said the Minnesota Chamber realizes that it would be hard to get the state to simply eliminate the tax all at once.

“The minimum we would like to see would be to eliminate the inflation escalator this year,” said Pumarlo. “That would be about $10 million this year, and about $85 million over the next two-year budget. When we’re talking about general fund of $42 billion, it is so miniscule.”

The Chamber would like to see the tax phased out over several years.

The impact would be statewide, said Pumarlo, affecting every business in every community, freeing up money for other needs, for hiring more people or expanding.