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Sales tax for a Vikings stadium might be small, but the cost adds up

  • Article by: ERIC WIEFFERING
  • Star Tribune
  • May 14, 2011 - 1:41 PM

No matter where the new Vikings stadium is built, a big chunk of the $1 billion cost will be paid for with nickels and dimes.

Our nickels and dimes.

If the team ends up in Ramsey County, $350 million worth of those nickels and dimes will be rolled up via a 0.5 percent sales tax applied across the county.

A new Minneapolis stadium, meanwhile, would raise the cost of every taxable item sold only in the city, with an especially heavy burden falling on anyone willing to spend money at any restaurant, coffee shop or bar within the city limits.

A fairer approach would be to acknowledge that the Vikings are a state asset, and thus ask all of the state's residents to help pick up the cost through a universal, but smaller, sales tax. Or, failing that, dun the people who care and benefit the most, by increasing the tax on game tickets, concessions and parking.

Instead, elected officials have convinced themselves that targeted, small sales tax increases don't mean much to consumers. In Ramsey County, for example, one commissioner said the sales tax increase amounts to a trifling 50 cents on a $100 purchase.

Which I suppose is fine, if $100 is all you're planning to spend in Ramsey County during the rest of your life.

But consumers are more calculating than lawmakers and billionaires might appreciate. Economists at DePaul University in Chicago found that during the 2008 recession, retail sales fell significantly faster in Cook County cities that bordered counties with lower sales tax rates.

"Some of the decline appears to be a shift in consumer buying to lower-priced retail areas across the county boundary," noted the paper's lead author, Joseph Schweiterman.

The thing about these small tax increases for specific purposes is that they never seem to go away. The Minneapolis proposal, for example, calls for extending a tax initially established to finance an expansion of the convention center.

These little taxes also collide and pile up. Start with a state sales tax rate of 6.875 percent. Add local general sales taxes, local special taxes on restaurants, bars or hotels, or dedicated sales tax surcharges to fund transit improvements or build the Twins ballpark, and before you know, that sales tax has grown into double digits.

What's more, this low-margin, high-volume approach to tax increases doesn't diminish the unfair nature of the sales tax itself. Relative to their incomes, families that may never be able to afford a ticket to a Vikings game will end up paying a higher share of the stadium's cost. People who have no intention of ever going to a Vikings game will help pay for a stadium that does not even pay property taxes.

Restaurant and liquor taxes in downtown Minneapolis are already among the highest in the state. The tax on food, 10.775 percent, is more than 3 percentage points higher than in St. Paul. The liquor tax is 13.275 percent, but rises to 16.275 percent if you're drinking at a nightclub featuring a band, standup comedian or other live form of entertainment.

"Oh, yes, customers notice," said Brenda Langton, owner of Spoonriver, a restaurant just a few blocks from the Metrodome. "It's always been hard for us to have much higher taxes than restaurants in other parts of the city, or in other cities."

Are consumers changing their behavior in response? That's tougher to judge, given how much the downturn in the economy has hurt convention business in Minneapolis. But gross sales at Minneapolis bars and restaurants rose almost 10 percent between 2005 and 2009, to $944 million, according to sales and use tax data collected by the state of Minnesota. During that same period, sales in St. Paul rose almost 17 percent.

Hospitality Minnesota, a restaurant industry trade group, sent a letter to Minneapolis Mayor R.T. Rybak last week because his stadium financing proposal, in addition to raising sales taxes citywide by 0.15 percent, includes pushing downtown's additional 3 percent liquor and food tax across the city.

"We want the Vikings to stay in Minnesota, but Minneapolis restaurants already pay a disproportionately higher share of taxes," said Dan McElroy, the group's president. "The risks of losing business to competitors that have a 3 percent price advantage is too great."

David Burley figures some of his customers are going to have to eat part of the cost of the stadium no matter where it gets built, even if he stands to gain very little from it.

"Fundamentally, I think it's the wrong approach," Burley said.

His firm, Blue Plate Restaurant Co., will soon open a second restaurant in Minneapolis, but neither is downtown. His three St. Paul restaurants are 10 or more miles from the Arden Hills site, but those customers will pay more to eat and drink than the ones who visit his Edina or Maple Grove restaurants.

"If the Vikings are a state asset, why should a restaurant miles from a new stadium in one city pay more for it than a restaurant in Duluth or Mankato?" Burley asked.

Taxpayer funding of a new stadium may be inevitable, so let's memorialize the transaction and insist that every receipt include a new line item, the Vikings Tax. That way, we'll know exactly how much we're being nickeled and dimed.

ericw@startribune.com • 612-673-1736

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