There is growing opposition to the expansion of the proposed 5.5 percent sales tax to services, such as haircuts, legal bills, tattoos, accountant fees and media advertising. Adding a 5.5 percent tax upon such services can have a negative impact upon many of these businesses, especially in rural areas.
One of the unforeseen windfalls though of any sales tax expansion is the potential increased revenue for the local-option sales taxes in some counties and cities across the state.
As Dayton’s proposal now stands, the local-option sales taxes would remain in place but apply to everything the state considers taxable, according to The Associated Press.
Thus local-option sales taxes already approved would be applied to a wider tax base and, in turn, would generate higher revenue levels.
The Associated Press reported that the Hennepin County sales tax of 0.15 percent in place now to pay for Target Field, libraries and youth recreation field would increase significantly. In 2011, this tax raised $31 million. If the Dayton plan were this in place, tax would have raised nearly $20 million more in 2011, which in turn would help pay off the bonds much sooner. This could save taxpayers significant interest costs on these bonds.
When the Legislature considers this sales tax change, it should also include specific language to specify that these narrow-focused local sales tax turn off when the desired revenue and/or time period is reached.
Willmar is a prime example of implementing a local sales tax and ending it. Willmar twice implemented a local sales tax for specific local projects and twice ended those taxes.
In addition, all Minnesota cities and counties should be treated equally, with the same requirements. No county or city should be treated differently before the Legislature when seeking permission for a local-option sales tax.
Willmar is an example where the local-option sales tax has worked twice to the benefit of the public good.