Cities and counties want new sales taxes; House chair won’t hear of it
Rep. Aisha Gomez, DFL-Minneapolis, says she doesn't intend to hold hearings for bills that would allow cities and counties to raise sales taxes. Photo by Catherine Davis/Minnesota House Information.
Democratic and Republican lawmakers are sponsoring a record number of requests for sales tax hikes in their districts — from Stearns County to St. Paul to Marshall — to raise money for new jails, road repair and parks improvements.
But they face an unlikely opponent to their requests: Rep. Aisha Gomez, DFL-Minneapolis, who chairs the House Taxes Committee.
Gomez, a progressive Democrat who would ordinarily favor higher spending and taxes, says she doesn’t plan to schedule tax committee hearings for any of the three dozen local sales tax bills totaling more than $2.75 billion that have breezed through the Senate with bipartisan support.
“It’s about principle to me,” Gomez said. “We want funding to be equalized across our state. And we have a tradition of that in Minnesota, of making sure that the quality of somebody’s life … doesn’t depend on the accident of where they were born.”
Gomez says the proliferation of local sales tax hikes, which must be approved by the Legislature and local voters, are inequitable for two reasons: They hit low-income Minnesotans harder, and they privilege cities and counties with retail bases large enough to raise revenue off a sales tax increase.
She said local sales taxes cut against the logic of the “Minnesota Miracle,” a package of tax reforms passed in the 1970s. That overhaul raised income taxes in order to redistribute it equitably across the state. The system was a boon for rural and poor communities, which had been forced to ratchet up property taxes to fund schools and public services that were in worse shape than those in wealthier areas.
But the state’s funding to cities and counties — called Local Government Aid — hasn’t kept pace with inflation or local budgets in years, leading many to raise property taxes.
Winona County wants a .25% sales tax to raise up to $28 million for a correctional facility. Hibbing wants a .5% sales tax to raise up to $19.6 million for a regional public safety center. And St. Paul wants a 1% sales tax to raise up to $738 million in street improvements and $246 million for parks and recreation facilities.
Approving requests from cities and counties to put sales tax hikes to voters are generally non-controversial and politically easy for both parties because they don’t cost the state any money.
The proposals sailed through the Senate and were laid over for likely inclusion in a larger tax bill.
But at a recent committee hearing in the House, Gomez said rubber stamping the proposals amounted to lawmakers shirking their responsibilities.
“I don’t look at the tax bill as a place to give away goodies to people,” Gomez said.
Gomez said she is supportive of the metro-wide sales taxes being proposed to fund transportation and housing, however, because the burden is shared across a whole region.
She and Rep. Steve Elkins, DFL-Bloomington, have authored a bill to create an advisory task force (HF3069) to recommend new “guardrails” on what local sales taxes can be used for.
Rep. Greg Davids, R-Preston, said during the committee meeting he supports creating a task force — but after they pass the 36 proposals this year.
“One reason I really like them is the voters have to pass them,” Davids said. “This is an issue of local control. If the voters don’t want it, don’t vote for it.”
Yet Elkins pointed out that local sales taxes are often paid by non-residents, which is part of the appeal.
In its pitch for a sales tax hike, St. Paul noted that visitors don’t directly contribute to paying for infrastructure. When Edina asked voters for its sales tax increase, it told voters 55% would be paid for by non-Edina residents.
“That is the only reason any city wants a local option sales tax, is that they know that that tax will be largely exported to non-residents,” Elkins. “What you’re basically giving your local voters the option to do is tax other people’s voters.”
Elkins said two years ago he declined to author a bill for his hometown of Bloomington to raise sales taxes because of its massive retail base. This year, Bloomington was able to persuade four lawmakers to carry their proposal for a .5% sales tax increase to raise over $150 million.
Yet taking a principled stance against sales taxes now favors the cities that were able to get theirs passed in recent years.
Richfield residents often shop in Minneapolis and Edina, both of which have local sales taxes. Now the city wants its own — .5% to raise up to $65 million for a nature center, veterans park complex and community center.
Gomez’s decision not to hear local sales tax proposals may not mean the proposals are completely dead. The House and the Senate will have to align their tax bills before they head to the governor’s desk, which offers another opportunity for negotiations.
“It’s a democracy. I’m one person,” Gomez said.
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