Agenda Packets - 1997/04/07 - Laserfiche WebLink

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State • ituneeds better mix of revenue sources ; 7 y Dee Long and Doug Johnson � v" `��`�" terns and consumer appetites Percent of revenue from 'Big Three" taxes have shifted, but our sales tax "Powerful economic. demo- base reflects decades-old buying -raphic, and technological 60% trends. hanges are occurring in Minne- 53.6% So,given the relative merits of eta, the nation, and the world. ` ' the"Big Three."how do we mod- ltho ugh these changes are 50% ernize our tax system to make it zrgely beyond control or ma- : • NET PROPERTY TAX more efficient and equitable? ipulation by Minnesota (or by • \� i Back in 1984, the Latimer • ny state government), they can- 40°iCommission recommended of be ignored in the design of the 291„ broadening the sales tax to in- ,ate's tax structure." ' dude personal services and new — Report of the Minnesota 30% clothing. Others have advocated ax Study Commission (the INDIVIDUAL INCOME TAX .• - 27.7%'' new models of business tax- --atimer Commission"), De- • ._• •°•�.� .•`•`~j? ation, such as the value-added ember 1984. 20% •- • •-• 23.2%; tax or a business activities tax. With 10 proposals intro- �' "• Neither idea is well-received in seed in the Legislature, 1997 10%14.5° ' .;.: . a political climate where elected :ay go down as an importantSALES TAXES 1 officials are afraid of even the :ar in the history of property � 8.0% i � mere mention of a new tax.How- x reform in the state of Minne- p i ever, a broadened sales tax base )ta. The chances are good that 1965 1970 1975 1980 1985 1990 1995 (coupled with a lower rate) could )me combination of relief and actually yield a more progressive form will be accomplished. Source:Minnesota Department of Revenue P and stable tax. And a w . ut as we move toward the next designed business activities ;illennium, it seems prudent to relationship to creation of response to public demand for could actually improve the sta :fleet on the insights offered by wealth. A notable example is property tax relief and the state's business climate by shifting some .e Latimer Commission some "infopreneur" and Microsoft need for replacement revenues. of the tax burden from Min- )zen years ago. founder Bill Gates. While the income tax is a far bet- nesota-based companies to those The property tax was adopted It is often argued that the ter measure of wealth than the based in other states or countries. 1849 by the First Territorial property tax is the most stable property tax,it also is vulnerable We must reduce our depen- ,sembly"to establish and main- — and therefore desirable — of to changes in the state and dence on the property tax, once in common schools."Property our taxes because it is less vola- national economy.The prolifera- and for all. But to do so—even x collections actually go back tile than other taxes in times of tion of fringe benefits,tax-exempt more significantly than we have veral millennia,with tributes of economic distress. Both history compensation and various credits proposed in our reform plan- -ain or cattle submitted by ten- and predictions show this not to and deductions erodes our will require some form of alter- its and land owners to the ruling be the case,however. income tax base and leads to native revenue. , ass.The connection of wealth to In the early 1980s,Minnesota's inequities among taxpayers. Let us be clear: There is no nd holdings held s.wav until the farm crisis led to decreases in Our corporate income tax is need to raise the overall tax bur dustrial Revolution. farm values of 50 percent and beset with similar problems: den on Minnesotans, but there As we moved from field to more. In the early 1990s, slack base erosion and inequitable ex- is a need to discuss a more ap= story,property became less re- demand for downtown business elusions, plus outmoded meas- propriate mixture of revenue :We as a measure of wealth.An property caused values to drop 10 ures that have not kept pace sources to pay for the level of ,ing couple who purchased a percent or more. Now, econ- with the changing nature of the state and local services that Min= )me with taxes that seemed omists and planners foresee val- marketplace. nesotans have come to expect. fordable years ago now find uation losses in the residential The newest of Minnesota's at their fixed income renders market as the baby boom gener- taxes, adopted in 1967, is the — Rep. Dee Long, DFL-Minne- em hard-pressed to meet taxes ation reaches retirement and re- state sales tax. Once again, this apolis, is chair of the House Tax vied against the same home locates to townhomes and con- new tax was enacted to offset Committee;Sen. Doug Johnson, ?cause of inflationary increases dos. rising property taxes. Thirty DFL-Cook, is chair of the Senate its value. Technological ad- Demographic shifts will also years ago, a consumption tax Tax Committee. nces have created a business affect Minnesota's individual and made sense and a narrow base mate in which property hold- corporate income taxes. These targeted goods rather than ser- What homeowners can expect gs also have little or no direct taxes we-'first enacted in 1933 in vices. Since then, spending pat- reform.Turn to A27.