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Sales tax on clothing is nothing to be scared of

Date Published: 05/01/2009

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Sales tax on clothing is nothing to be scared of

Star Tribune | April 10, 2005
By Lori Sturdevant

The ghost of Gov. Harold LeVander marched through the Capitol basement last week, tugged the lapels of his circa 1965 plaid sportcoat, and glowered in my direction.

"You want me to pay sales tax, on this?" he asked.

Yes, Governor, it's so: Last Sunday, the Star Tribune editorial page said that state taxes should be raised this session, and that we'd start by adding $1 per pack to cigarettes, and putting the sales tax on clothing.

I know, that's the tax you vetoed in 1967, but that the Legislature put into law on an override vote. Those votes were rounded up with a promise that it would never, ever land on clothing or food.

Times change, I allowed. The gubernatorial ghost was nonplussed. "Don't you people believe in taxes based on ability to pay?"

That would be the income tax, and we're still believers. If it weren't for the income tax that Floyd B. Olson originated, Orville Freeman, Elmer Andersen and you defended, Wendell Anderson raised and Al Quie fixed to account for inflation, Minnesota would have become one of those soak-the-poor states, with poor services and a poor economy to show for it.

With a progressive income tax acting as a counterweight to regressive sales and property taxes, Minnesota taxes have fallen fairly on rich and poor alike. And the state has flourished. Fact is, so have most states with high income taxes, according to the think-tankers at Growth and Justice.

Those folks have been calling attention to a non-progressive trend: Minnesotans with seven-figure incomes now pay a considerably smaller share of their incomes in state and local taxes than do people with incomes under $100,000.

That disparity is one consequence of the income tax cuts Minnesota enacted in 1999 and 2000. It's one reason that a number of principled voices have urged that if the state needs more money (and it does), the first tax in line for an increase should the income tax paid by big earners.

They also cite another good reason: The state's four straight years of revenue shortfalls can be traced directly to those 1999 and 2000 income tax cuts. Raising the income tax can be cast as correcting a mistake. As DFL Sen. John Hottinger, the sponsor of a tax cut rollback bill, likes to say, that's a "reasonable and compelling argument."

But it doesn't sell with state Rep. Ron Abrams. And any tax increase has to persuade moderate House Republicans like Abrams, or it can't fly this year.

Abrams chaired the House Tax Committee from 1999 until 2004. His fingerprints are all over those 1999 and 2000 income tax cuts. They are also on a few bills this session to raise the cigarette tax, er, "fee."

He's not a "no new taxes" Republican. But a high-end income tax hike ranks at the bottom of his list of revenue enhancement possibilities. He's got three reasons, all worth hearing:

"When you're recruiting executives from out-of-state, they don't ask what your state's license tab fee is. But they do look at the top state income tax rate," Abrams said.

I'd bet that they don't look at whether this state taxes clothing purchases, either. They probably assume that Minnesota does, since most states do. Those states' experience shows that taxing clothing sales makes state revenues more stable and slightly more progressive. It turns out that rich people actually do buy $1,500 suits.

Sorry to disappoint you, Gov. LeVander. But we opted to pass on asking the Legislature to tax Minnesota executives' incomes at a higher rate, in favor of urging that they be taxed on their next new suit.

Lori Sturdevant is a Star Tribune editorial writer and columnist. She is at lsturdevant@startribune.com.

 


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