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Tax picture changing in Minnesota? Dayton proposes shift to sales

Taxes are certainly not something that is set in stone although it might feel like it to the taxpayers. The kinds of taxes, the structure, set thresholds for certain deductions or taxes are constantly changing. In fact, Gov. Mark Dayton has discussed the idea of shifting Minnesota’s tax structure to one that depends in part on increasing the sales tax.

As it stands, Minnesota’s tax structure is like most states around the country. It depends largely on state income tax. However, Minnesota is one of several states that are considering putting even more reliance on taxing the everyday items and services. Other states considering a similar shift are Nebraska, Kansas, Louisiana and North Carolina — with some major differences of course.

Revenue in Minnesota has dropped in the recent past. This year’s budget shows a $627 million shortfall that could affect the funding specifically for public schools and the property tax rebates that homeowners enjoy. The suggestion was part of Dayton’s new budget proposal, and one that he says will raise approximately $2.2 billion – enough to cover the multi-million dollar shortfall.

Dayton’s plan is to increase the sales tax to more goods and services than it currently is applied to. We mentioned that other states are considering a similar shift. They key word in that statement is similar. The major difference in some of the plans is the elimination, phasing out or decreased reliance on income tax. There is no doubt that the proposal has created opposing arguments both for and against. Visit our blog next week for the continuation of this discussion.

Source: Star Tribune, “Minnesota is one of several states weighing shift to sales tax,” Adam Belz, March 4, 2013

When tax liability issues arise in Minnesota, our law firm is there to help. Visit our website to learn more.

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