Minnesota Lawyer
Sen. Tom Bakk
Senate Taxes Committee Chairman Tom Bakk, DFL-Cook, announced last week that he’s introducing a bill to add clothing to the state’s sales tax in order to pay back last year’s K-12 school aid shift and reduce the current budget deficit.
While expanding the sales tax base, Bakk also wants to lower the sales tax rate from 6.5 percent to 6.25 percent.
Minnesota is one of just five states that don’t tax clothing sales, and Bakk claimed that the clothing tax would be markedly less regressive than the general sales tax. According to numbers he cited, the top 10 percent of wage-earners would pay about 31 percent of the resulting tax on clothing.
The new money from taxing clothing would pay for the rate reduction as well as providing for the repayment of Gov. Tim Pawlenty’s ad hoc 2009 school aid shift over a 10-year period.
“This does not create new spending,” Bakk said.
After the school shift is paid back, the general sales tax rate would be lowered yet again, to 6 percent.
Bakk noted that his proposal would be a key part of plugging the budget gap.
“This is my proposal to resolve a fourth of the [short-term deficit] problem through some revenue,” Bakk said.
Bakk, who is vying for the DFL endorsement for governor, said he would get new revenue from the income tax if here were “king for a day.” But he said the sales tax approach stands a better chance of becoming law.
“I have no interest in sending a tax bill to the governor that he is going to veto,” Bakk said.
Retail lobbying groups, and Pawlenty, have opposed proposals to tax clothing in previous years. Bakk wrote a letter to Pawlenty asking for his support.
The issue has been debated for decades. Most recently, the 21st Century Tax Reform Commission, which was appointed by Pawlenty, proposed expanding the sales tax base to reduce the volatility in the state’s revenue collections.
