We are on the verge of a major shift in our state tax system. Looming over our state is a projected deficit of $1.1 billion this year. To counter this, Gov. Mark Dayton and the Democrat-Farmer-Labor legislature will be coming out with new measures to balance the budget. Although the primary changes will consist of increases to income and property taxes for the wealthiest Minnesotans, there is now major speculation over extending the state sales tax to clothing.
The base state sales tax, which stands at 6.875 percent, offers numerous exceptions. These include, but are not limited to, clothing, groceries and prescription drugs. With the potential to accumulate $300 million this year from a tax on clothing, though, some see this as an inventive departure from Dayton’s previous promises to change taxes.
Although the extension of the sales tax to clothing would significantly shrink the Minnesota state debt, we must remember to weigh two key factors when considering such an action.
The first is the impact it would have on the poor. Those who belong to the middle and upper classes would have no problem paying a few cents on the dollar for their clothing, but what about the economically disadvantaged? We must consider the fact that this is a flat tax, so it will have a disproportionate effect on those with a smaller income. To account for this, the DFL will most likely add a rebate for lower income individuals or only tax clothing items above $200.
The other includes the real political ramifications for the DFL. They may have taken the state legislature back from the Republicans, but passing a new tax is never a popular move. Any opportunity the state GOP has to attack the DFL as tax-and-spend liberals may be exploited.
Although the DFL has good intentions with the clothing tax proposal, they must take into consideration the real consequences of such a proposal. This is a noble attempt at fiscal responsibility, but there are other ways that Minnesota can try to cut down on its state deficit.