Governor Dayton has recently proposed modifications to the state sales tax that would have a significant negative impact on the people of the City of Waconia, and similar impact to local government budgets across the state.
The Governor’s general plan is to reduce the general state sales tax rate while applying the new lower rate to professional services such as legal, accounting, engineering, computer, management consulting, advertising, employment, and business support services as well as other goods and services that were not previously subject to sales tax.
I generally agree with the broader base/lower rate approach to tax reform. We don’t need more taxes, we need simpler, fairer, flatter taxes – and more taxpayers so that each of us can pay less. In his State of the State address Governor Dayton said, “My budget is balanced, fair, and honest. No gimmicks no games.” As you will see below, he wasn’t being entirely truthful.
A City the size of Waconia (about 11,000 people) must contract for many of the services listed above that we provide to our residents. These include contracting with the County Sheriff for law enforcement and the County Attorney for prosecutions. We do not have a City Engineer or City Attorney on staff because it is not cost-effective to have these experts on the City’s payroll full-time. We contract for road construction, excavation, and other specialized services essential to the operation of our city. I expect that cities and townships smaller than Waconia have to dedicate an even larger portion of their budget for contracted services.
In our recent review the 2013 City of Waconia operating budget (approximately $6 million), we estimate that we would see an additional $280,000 sales taxes paid as a result of the Governor’s proposal. This is in addition to the $144,000 of sales taxes we currently plan to pay in 2013. His proposed sales tax “reform” would result in a six percent increase in taxes and fees charged to our residents and businesses – just to maintain the current level of service.
Let me just repeat that for clarity. If the Governor’s plan is adopted, your property taxes in the City of Waconia will go up at least 6% in the next budget cycle, and you will receive no added value from the City for this increase. Governor, is this is a gimmick or a game?
Local governments cannot control spending if the Governor decides to jack up the cost of our providing services for our citizens – the ones who pay the bill in the first place. But don’t forget, right before the 2014 election, the Governor will conveniently send you a $500 “rebate check,” which is really your money anyway – gimmick or game?
And magically, even though he claims no one will end up paying “more” tax, somehow St Paul will have $2+ billion more in revenue to spend. Do you really believe the Governor’s magic math? I don’t believe it for a moment, and I think those billions will be coming out of your pockets: be it sales tax, property tax or income tax. What has really been “reformed” in his plan?
The League of Minnesota Cities officially advocates making municipalities exempt from State sales tax. While this is a fine position from my City Council Seat, Jim the taxpayer realizes that it would significantly change the Governor’s sales tax magic math, and most likely end up costing you and me even more in the end.
It is up to you to contact your City, County or Township and find out how much you and your family will be impacted by the Governor’s tax “reform” plan. And then be in favor of his tax-shifty budget gimmicks and games or demand a more honest and transparent approach to tax reform – either way, make an informed choice, and make your voice heard.
by Jim Sanborn, Waconia City Council