On November 4, 2008, Minnesotans voted to amend the state Constitution to:
"...dedicate funding to protect our drinking water sources; to protect, enhance, and restore our wetlands, prairies, forests, and fish, game, and wildlife habitat; to preserve our arts and cultural heritage; to support our parks and trails; and to protect, enhance, and restore our lakes, rivers, streams, and groundwater by increasing the sales and use tax rate beginning July 1, 2009, by three-eighths of one percent on taxable sales until the year 2034."
You had me at "protect our drinking water."
But seriously, presented with this amendment at my local polling place, how could I vote no? I, like other voters, rallied behind the causes outlined in the amendment, before thoughtfully examining the means. Besides, the 3/8 of 1% increase in my sales tax is basically unnoticeable (read: not visible), and protecting our 10,000 lakes sounds like a great way to spend that marginally higher tax revenue (read: politically feasible).
The Clean Water, Land, and Legacy amendment is expected to generate between $230 and $250 million in revenue from the general sales and use tax each year from 2009-2034. The revenue will be split among four funds: Outdoor Heritage Fund (33%) ; Arts & Cultural Heritage Fund (19.75%); Clean Water Fund (33%); and Parks and Trails Fund (14.25%). The increased tax revenue will supplement funding for these causes from the General Fund and the biennial bonding bill.
Prior to passage of the bill, the main controversy surrounding the the amendment questioned the wisdom of levying a sales tax and dedicating funds (regardless of the nobility of the cause or need for funding) in the state Constitution, rather than by amending the state sales and use tax statutes. That controversy is not surprising, given a budget deficit of $4.6 million, and the legislature and governor in gridlock over how to balance the budget. Now that the the amendment is in place and the legislature is back in session, a renewed controversy is brewing.
A Star Tribune article published last week examines how organizations can potentially fund an environmental, arts, or cultural project through multiple mechanisms--like the bonding bill, Legacy funds, and the state lottery--and calls this "double dipping." This comes at time when organizations and state agencies are experiencing deep budget cuts and may wish that they, too, could have access to constitutionally dedicated funds.
Based on some un-scientific research, it seems that most states use the constitution to establish their authority to levy taxes, rather than to dedicate tax revenue to specific funds, perhaps with the exception of lotteries. The Legacy Amendment is unique. By passing the amendment, the citizens of Minnesota made a major statement about their priorities and their willingness to pay more (not to replace existing funding sources) to protect them.
Friday, February 26, 2010
LOST! in Minnesota
Although known for being regressive, sales taxes have been on the rise in many localities as a means to stave off budget deficits. Locally, municipalities can implement a local option sales tax (LOST) which adds to the base state tax rate for specific geographic areas, usually cities or counties. Use of LOSTs vary state-to-state. Sixteen states do not have any local option sales tax while 100 percent of
Metro Area LOST
As you can see from the above numbers, the local option sales tax is not relied upon heavily in
Obviously, there are concerns over equity regarding a sales tax that mainly benefits the rich (the Pohlads, Twins players and executives). However,
| Local Option General Sales & Use Taxes in Minnesota1 | |||||
| | | | | | |
| City or County2 | Rate | Effective Date/Year Enacted | Total Collections | | |
| CY 2006 | CY 2007 | | |||
| | 1% | 1973 | 11,398,159 | 12,225,979 | |
| | 0.5% | 1983 | 9,255,831 | 9,833,630 | |
| | 0.5% | 1986 | 28,493,948 | 30,425,381 | |
| | 0.5% | 1991 | 4,128,429 | 4,336,869 | |
| | 0.5% | 1993 | 15,452,470 | 16,171,673 | |
| | 1% | 1993 | 1,079,651 | 1,181,754 | |
| Hermantown | 0.5% | 1996 | 1,137,678 | 1,193,037 | |
| Two Harbors | 0.5% | 1998 | 265,107 | 270,768 | |
| New | 0.5% | 1999 | 886,988 | 939,425 | |
| Proctor | 0.5% | 1999 | 151,314 | 132,582 | |
| | 0.5% | 2002 | 8,114,589 | 8,719,065 | |
| | 0.5% | 2005 | 1,475,634 | 1,794,419 | |
| | 0.5% | 2005 | 1,423,560 | 1,690,976 | |
| | 0.5% | 4/1/2006 | 672,514* | 1,193,642 | |
| Baxter | 0.5% | 10/1/2006 | 269,460* | 1,907,480 | |
| | 0.15% | 1/1/2007 | - | 24,573,495* | |
| | 0.5% | 4/1/2007 | - | 1,240,622* | |
| | 0.5% | 4/1/2007 | - | 824,840* | |
| Brainerd | 0.5% | 4/1/2007 | - | 556,740* | |
| Total | 84,205,334 | 119,212,375 | | ||
| *Includes | |||||
| **Partial year of collections. | | | | | |
| 1 Excludes selective sales taxes (restaurant, liquor, etc.) and lodging taxes. | | ||||
| These totaled $64 million in calendar year 2005 and show little growth. | |||||
| 2 Excludes the following | | ||||
| 5 metro counties -- transit tax at 0.25% (eff. 7/1/08) | |||||
| North Mankato & | | ||||
| | | ||||
| Mall of America (0.5% to 1% possible as early as 1/1/09) | |||||
| Other county taxes for transportation projects are also possible. | |||||
On July 1, 2008 five metro counties in the “transit tax area”, added 0.25% sales tax for transit improvement. The income from this tax is handled by the County Tax Improvement Board which disburses money for transit projects in the area such as the Central Corridor LRT and Cedar Avenue BRT (CTIB). Despite the small increase, this tax creates a large amount of revenue. In two years the sales tax has amounted to $100 million in revenue for CTIB (report found here).
These two taxes highlight the contradictory nature of LOSTs in the Twin Cities. Sales taxes are inherently regressive but here they are implemented with an attempt to also aid low-income residents. This should be an interesting trend to follow locally as local option sales taxes are only gaining momentum but will likely only find political support with some attempts to mitigate their impact on low-income residents.
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