Local sales tax proposals could be tough sell in metro area
The Minnesota Legislature authorized more than three dozen cities and counties to seek voter approval of local-option sales taxes ranging from a quarter percent to 1.5%.
However, the Legislature surprised many local governments when they also imposed a three-quarter of a cent metro-wide sales tax for transit projects and a quarter percent for housing. That means more than a dozen metro cities will be asking voters to increase sales taxes at the same time the state already raised them by 1%.
“Minnesotans will be paying more for the goods and services they’re going to be consuming,” says Rep. Pat Garofalo, R-Farmington, who has long sounded the alarm about how higher taxes are causing more people to move out of Minnesota. “Minnesota has always been a high-cost state, but the question is how much of this tax capacity can people absorb before it starts damaging the economy and resulting in people leaving our state?”
“We are asking for the opportunity to take this question to our St. Paul voters so our St. Paul voters can make that decision for themselves if the dire and urgent needs within our city streets and parks are worth the one penny,” St. Paul Mayor Melvin Carter testified in March at the State Capitol.
The city made its proposal before knowing the state would impose other new sales taxes. Carter wasn’t available for comment on Monday, but a spokesperson for the city said the St. Paul City Council will discuss the sales tax proposal on Wednesday. The council is likely to seek to put the issue on the ballot this November during city elections.
Many other cities will face the same decisions. For example, Bloomington is seeking a half-cent sales tax increase for upgrades to the Bloomington Ice Garden complex, and Mounds View is seeking a 1.5% increase to expand the city’s community center.
Edina is in a more enviable position. Voters there approved a half-cent sales tax increase in 2022, but now the city wants to expand the scope of projects using that existing tax because it’s bringing in more revenue than projected. The city is using the money for mountain biking trails, walking trails, baseball field lighting and major improvements to the Braemar Ice Arena complex.
Mayor Jim Hovland says the city will ask voters to allow them to expand the scope of the project without increasing the tax, which he knows might be a tough sell with the other state-imposed sales taxes.
“You have to be really cognizant of what burden you’re putting on people with the sales tax because it keeps edging up,” Hovland told 5 EYEWITNESS NEWS.
The tax bill also puts in place a moratorium on new local-option sales tax approvals after those in the current bill until 2025.