In December, I wrote about the formation of a “Blue Dog Coalition” in the Minnesota Senate. This is a group of eight DFL senators who, among other things, promise to be “careful with [Minnesotan’s] tax dollars.” Of course, every single one of these “Blue Dogs” voted for the 23% real terms, per capita expansion of state government spending from 2019 to 2024, a rate of growth unprecedented in recent decades at least. But it was also reported that the Blue Dogs would not vote to raise taxes in the current legislative session and I concluded optimistically: “Maybe these dogs really have learned some new tricks.”
My optimism may have been misplaced. The Sun Post reports:
Senator Ann Rest (DFL-New Hope) said Governor Tim Walz’s proposed plan to lower the state sales tax for the first time in state history would make the system fairer, less volatile and make Minnesota more competitive with neighboring states.
…
“Lowering the sales tax rate for everyone and expanding the base of services covered by that lower rate is good tax policy and represents long-overdue modernization and improvements to our system,” Rest said. “This proposal recognizes that we’re now a service economy and protects lower-income Minnesotans. The lower rate will make our state more competitive with neighboring states. The proposal will be part of the budget discussion as we move through the legislative session.”
So, it seems that Sen. Rest, one of the Blue Dogs, is open to raising taxes after all. The notion that cutting the sales tax rate from 6.875% to 6.8% so that on a purchase of $100 you’d save eight cents will “make our state more competitive with neighboring states” is absurd. Minnesota has the sixth highest sales tax rate in the United States, so this cut would move us all the way down to… eighth highest and that applied to a bunch of stuff that is currently exempt.
As I noted last week: “The Holy Grail in tax policy is to levy low rates on a broad base. Gov. Walz’ budget moves us in that direction, so deserves at least some praise.” “But,” I went on:
…in practical terms, what matters is the extent to which the reduction in the tax take from the lower rate is offset by the increase from the broadened base. Under Gov. Walz’ budget, the average family will save about $42 a year in reduced sales taxes but that saving would be dwarfed by spending $620 on the newly taxed professional services. Overall, the expected impact is about $185 million in additional revenue for the state government.
This measure will raise the amount of tax that Minnesotans pay, something the Blue Dogs said they wouldn’t do. If they are willing to vote for the governor’s proposal they are more obedient than the average Golden Retriever.
I concluded last week that:
Lower rates on a broader base is a sound guiding principle. But in Minnesota’s circumstances, the governor’s particular proposal is totally unacceptable. We would only support a base-broadening measure if the revenue effect was at least offset with lower rates, and with the sixth highest rate of state sales tax in the United States, there is ample scope for that.
We are sticking to our position.
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