The ink is hardly dry on the new Minnesota sales taxes and already lawmakers are talking about changes.
Some state businesses that face sales tax on warehousing services next year have been vocal about moving out of state if the tax kicks in. Expansion of the sales tax on some services while exempting purchases by local governments was a key initiative in the last session. But Distribution Alternatives in Lino Lakes warned that the 6.875 percent increase would put his business at a disadvantage against his competitors who won’t have to pass on the increase to their customers.
Minnesota Public Radio reported that some Democrats in charge of both the House and Senate tax committees say they are willing to revisit that tax.
And then there’s the increased sales tax on business-related equipment repairs. Rural lawmakers have voiced their concerns about the increase in the sales tax for farm equipment and want an exemption.
House Tax Chair Ann Lenczewski told Minnesota Public Radio she is willing to revisit the sales tax changes next session. However she is concerned that if there are any repeals just how they plan on filling any resulting shortage to the $300 million revenue that was projected to come in. “I’m not interested in raising any taxes at all for anything. We did that this past session,” she said. “People can cut some things.”
And, frankly, that is one of the appropriate responses to have at this time. The Legislature passed tax increases on higher incomes, tobacco, warehouse services and elimination of some corporate subsidies amounting to a $2 billion tax increase. And with it came an expansion in spending which Democrats have said is just meeting pent-up demand from years under tight Republican control.
This increase in spending comes with a price and if revenues fall short, maybe the answer isn’t increasing more taxes but tamping down spending.
The second appropriate response comes from Revenue Commissioner Myron Frans who told Politics in Minnesota on a separate taxing issue that judgment on revenues probably should wait until the November economic forecasts is compiled. We also would add we should hold judgment on any adverse effect resulting from taxation. We need empirical evidence not just anecdotal evidence.
Let’s cool our jets for the moment and allow for a dispassionate study on the effects the changes have had — economic changes, the consumption changes and expected change to the state coffers.