Metro sales tax could hit new high

05/06/2006

Patricia Lopez
Star Tribune
Last update: May 05, 2006 – 9:23 PM

As the Minnesota Senate contemplates a stadium/transit proposal that would add an extra half-cent of sales tax for the seven-county metro area, legislators might want to consider this: Compared with other major cities in the Upper Midwest, the Twin Cities would have far and away the highest sales tax rate.

Fact is, the metrowide sales tax hike is far from becoming law; majority House Republicans and GOP Gov. Tim Pawlenty have voiced strong opposition.

Nonetheless, folks often forget that Minneapolis and St. Paul—unlike their surrounding suburbs—already add an extra half-cent as a local option sales tax. That puts the two big cities’ rate at 7 percent, compared with the state sales tax rate of 6.5 percent.

With a stadium tax, the figure would increase to 7.5 percent in Minneapolis and St. Paul—still less than Chicago’s 9 percent, but more than any of our neighbors.

“We’d be getting up there in the big leagues,” Minnesota Revenue Commissioner Dan Salomone said.

Bars and restaurants in downtown Minneapolis in particular would enter nosebleed altitudes. On top of its 7 percent sales tax, Minneapolis adds 3 percent to the wining and dining tab downtown, which would make the total tax bite 10.5 percent if the stadium option passed. St. Paul does not have an additional sales tax for bars and restaurants.

The sales tax is regressive, meaning it does not consider ability to pay, so is felt more sharply by lower-income workers.

Minnesota exempts food, clothing, and prescription and over-the-counter drugs from the tax. Its neighbors and most other states have narrower exemptions.

Salomone notes that the sales tax is considered one of the least onerous by taxpayers because they can control it by reducing their purchases.

“The sales tax consistently comes up as the least objectionable,” he said. “People just don’t think about it, so I don’t think it would have a major impact on buying decisions.”