State Senate panel advances sales tax measure

A Minnesota Senate panel has approved a measure to expand the state sales tax to clothing and personal services, while lowering the rate to 6 percent.

Members of the Senate Tax Reform Division voted along party lines today, with Democrats supporting the bill and Republicans opposed. The measure also exempts city and county government purchases from sales taxes, lowers the corporate tax rate, eliminates a deduction for foreign operating corporation income and raises the tax on cigarettes.

Sen. Julianne Ortman, R-Chanhassen, said she doesn’t think the lower sales tax rate is helpful.

“I don’t think that that’s a meaningful difference to Minnesota families, especially when you turn around on the other hand and impose taxes on their clothing and over the counter drugs, their auto repair services, their household good repair and maintenance,” Ortman said. “That’s gong to hurt them more than it’s going to help them.”

DFL Sen. Ann Rest, DFL-New Hope, the division chair, said the report represents true reform that will benefit the state.

“Economists tell us that broad-based taxes with low rates lead to stability in the tax system,” Rest said.

Much of the public testimony on the report was critical. Beth Kadoun, a lobbyist for the Minnesota Chamber of Commerce, said corporations would see a net tax increase under the measure. Maureen Bausch, executive vice president of the Mall of America, told lawmakers that the sales tax on clothing would be costly.

“Jobs will be lost, the vulnerable will be hurt, because lots of those jobs are entry-level jobs,” Bausch said.

Representatives of the University of Minnesota, Minnesota Timberwolves, Minnesota Twins and Minnesota Wild testified against a provision for a new sports memorabilia tax.

An anti-smoking advocate thanked lawmakers for a provision to increase the tax on cigarettes by 94 cents per pack. Molly Moilanen, director of public affairs for ClearWay Minnesota, said higher prices will make a difference.

“Raising the price of tobacco is a proven, life-saving provision that will help thousands of Minnesotans quit and will prevent thousands of children from a lifetime of addiction and painful death,” Moilanen said.

The division report will be rolled into the Senate’s bigger tax bill, which is expected to be released next week.