Even though Gov. Mark Dayton has abandoned the idea, Democrats in the Minnesota Senate will push for an expansion of the state sales tax to clothing and many personal services, while lowering the rate from 6.875 percent to 6 percent.
The Tax Reform Division report released today keeps alive some the sales tax proposals that Dayton abandoned last month. Unlike the governor’s original plan the DFL proposal would keep most business-to-business transactions exempt from the sales tax. Low income Minnesotans would be eligible for a tax credit on clothing purchases.
Sen. Ann Rest, DFL-New Hope, said the proposal will help modernize the sales tax system.
“We are more and more a service economy. We deal with that,” Rest said.
The personal services that would be subject to sales tax include:
–sports and dance instruction
–personal shopping services
Electronically-transferred digital books, music and movies would also be taxed. City and county government purchases would be exempt from sales taxes.
Businesses would lose the deduction for foreign operating corporation income. The corporate franchise tax rate would decrease, while the research and development tax credit would increase. There’s also more money for angel investment credits.
The tax rate on cigarettes would increase 94 cents per pack.
In addition, the Senate plan includes the sports memorabilia and suite taxes that recently surfaced as potential financing backup for the new Vikings stadium.
Senate Democrats will release another piece of their tax plan, which is expected to include an income tax increase on top earners, later, this month.
Rep. Sen Dave Thompson, R-Lakville, called the report “just a big tax increase under the guise of reform.”