The budget unveiled by Gov. Mark Dayton today includes $2.1 billion in additional revenue in the 2014-15 biennial.
A good chunk of that money will come from a tax on legal and other professional services.
Dayton says the proposed sales tax changes will both lower the sales tax rate and broaden it to include items like clothing that costs more than $100, about a $1 per pack increase on cigarettes and “business to business” services including accounting and legal work. Dayton’s office estimates the business to business tax could bring in about $1.5 billion annually. In addition to legal and accounting, services like architecture, specialized design, computer, management consulting, advertising, employment and business support services would also be included.
The corporate income tax rate would be reduced from 9.8 percent to 8.4 percent under Dayton’s budget.
The Minnesota State Bar Association has fought against a sales tax on legal services several times before, most recently during Tim Pawlenty’s second term.
The bar says the tax would amount to a tax on “misery” and unfairly targets those who need an attorney for help in child custody disputes, probate matters or to fight a foreclosure. Because the tax would not be paid by attorneys, but by purchasers on legal service, it would prevent many people from exercising their constitutional rights to use the state’s legal system because they cannot afford to do so. The bar also says the tax would be next to impossible to administer.
Dayton and the DFL-controlled majorities called today’s budget proposal a starting point, not a finished product.