The Minnesota DFL Party is going after Independence Party gubernatorial candidate Tom Horner’s tax plan.
An ad posted on the party’s website claims that his proposal to lower the deficit will “raise taxes on every middle-class Minnesotan,” by taxing items used by students and babies, essentials such as heating oil and water – even prizes at the state fair.
It’s true that Horner would have to tax many new items to lower the deficit. Trouble is, he hasn’t said what.
Horner says he wants to lower the sales tax rate by 1 percent. At the same time, he wants to expand the base to some things that are exempt from taxation, such as clothing and services.
All told, Horner aims to bring in $1.3 billion per biennium in new revenue. According to the Minnesota Department of Revenue, Horner has to expand the sales tax base by at least 34 percent to make that much cash. While he’s got some wiggle room in how he structures the plan – for instance, groceries, prescription drugs, medical devices, business-to-business services, and other things Horner’s said he won’t tax, could remain exempt – it’s true that he’ll have to expand the sales tax base quite a bit to make $1.3 billion.
That said, Horner hasn’t detailed his plan, and that’s why the DFL ad is misleading.
It lists myriad things, such as school text books ($47.6 million in new revenue after the 1 percent reduction in the overall sales tax), residential heating oil ($240.5 million in new revenue) and baby products ($854,000 in new revenue), that Horner would have to tax to come up with the cash – none of which Horner has said specifically he would tax.
Further, many of the items featured in the ad would generate very little revenue; for instance, taxing automatic fire sprinklers would bring in about $512,400 – less than one percent of the $1.3 billion Horner pledges to raise. Additionally, the revenue department generally considers such items business purchases, which Horner says he won’t tax.
The broader point of the ad is that Horner’s tax plan would unfairly hurt the middle class. And the conventional wisdom is that sales taxes hit lower income earners harder.
But again, a lot depends on what Horner decides to tax, according to Roberton Williams, a senior fellow at the Urban Institute in Washington, D.C. If the plan includes clothes or food that many people, rich or poor, buy, the sales tax becomes more regressive. If it’s items that wealthier people buy, the tax is more progressive, he said.
And while Horner has said he will tax clothes, he’s pledged to adopt a tax holiday, give a tax credit or keep purchases under $100 tax-free to ensure middle and lower income Minnesotans aren’t burdened by the levy. That fact is left out of the DFL ad.
It’s true that Horner wants expand the sales tax, and it’s likely many things that are not taxed now will be taxed in the future if he becomes governor. However, the DFL ad is misleading on two points: it assumes that Horner will tax things he hasn’t said he would tax. Further, it fails to mention that Horner has a plan to make the sale tax less burdensome for middle-and-lower income Minnesotans.
This PoliGraph test is inconclusive.
The Minnesota DFL, Tom Horner’s “Clear Vision”: Raising Taxes on the Middle Class, accessed Oct. 28, 2010
Tom Horner for Governor, Minnesota Works: The Horner-Mulder Budget, accessed Oct. 28, 2010
Minnesota Public Radio News, Horner’s tax plan typical in most of U.S., by Mark Zdechlik, Oct. 8, 2010
The Minnesota Department of Revenue, Sales Tax Base Broadening and Rate Reduction, Sept. 27, 2010
The Minnesota Department of Revenue, State of Minnesota Tax Expenditure Budget: Fiscal Years 2010-2013, February 2010.
The Uneasy Case for Extending the Sales Tax to Services, by Kirk J. Stark, University of California, Los Angeles – School of Law, March 24, 2003
Matt Lewis, spokesman, Tom Horner, Oct. 28, 2010
Kristen Sosanie, spokeswoman, Minnesota DFL, Oct. 28, 2010
Roberton Williams, senior fellow, The Urban Institute, Oct. 28, 2010
Morgan Holcomb, law professor, Hamline University, Oct. 28, 2010