Dayton's proposed tax expansion may be a tough sell

Dayton's proposed tax expansion may be a tough sell

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ST. PAUL, Minn. (KMSP) -

Gov. Mark Dayton wants to drop the sales tax rate from 6.8 percent to 5.5 -- but to do it, he'll have to expand the tax onto more of the things Minnesotans buy.

Dayton likes to compare the state's revenue to a three-legged stool. The problem is: It is seriously out of balance.

Property taxes have climbed 80 percent in the last decade and now account for about 40 percent of all revenue collected by the state. Sales taxes only pull in 27 percent.

So, Dayton wants to broaden the base and lower the tax rate to help even things out -- and provide a tax rebate to property owners. It may sound easy -- until you hit the checkout counter.

Anyone who hasn't bought a new winter coat yet might find the governor's plan a bit chilling, because the coat that is $246 today would cost $260 if the new taxes are put in place. A fancy snowsuit on sale for $750 would climb to $792 because any clothing item over $100 would be taxed.

It's not surprising that the Mall of America plans to lobby against the expansion, because the lack of one is the reason many shoppers in the Midwest flock there.

Yet, clothes aren't the only thing the tax expansion would cover. Services would also be included, like haircuts, health club memberships, and even auto mechanic. work There's already a sales tax on parts, but Dayton would extend it to labor too.

There are plenty of contradictions in the sales tax plan too. For example, a cookie may be taxed, but a cookie cake for taking home is considered unprepared and would not be taxed.

Currently, Minnesota's tax rate is the 7th highest in the nation. Broadening the base while lowering the rate would generate $2 billion and drop the ranking to 27th in the country. Still, Republicans are skeptical.

"I don't think people are going to respond very well on paying taxes on a coat for their children," said Rep. Kurt Daudt.

Republican Sen. Sean Nienow tweeted out that the $2 billion in revenues divided by the state's population amounts to $389 per person, or about $1,500 a year for a family of four at roughly $130 a month.

In tax circles, a very big debate is blooming about whether sales tax is regressive or progressive -- meaning whether it hurts the poor more or is applied to all residents equally. By establishing a $100 threshold, Dayton hopes to make it more progressive.

Yet, even the governor himself -- the great grandson of the founder of Dayton's Department Store -- said the idea of taxing clothes is a tough tradition to break.

"I have to admit, taxing clothing goes against my upbringing," Dayton quipped.

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