Details were scarce in the broad-brush biennial budget outline that Gov. Mark Dayton and DFL legislative leaders painted Sunday afternoon. But when Senate majority leader Tom Bakk said the plan involves "significant sales tax reform" and Dayton added that consumers would not see the sales taxes applied to clothing or personal services such as haircuts, business lobbyists took notice.
Sales tax reform that doesn't involve consumers must involve businesses. Bakk acknowledged that ideas for taxing some currently exempt purchases made by businesses are again under discussion.
That's the category of tax changes that Dayton proposed in January, then withdrew in March after taking heavy fire from affected businesses.
But then, Dayton was out to raise more than $2 billion from business services sales taxes, and wanted to reduce the overall state sales tax from 6.875 percent to 5.5 percent. The leaders' charge to the House-Senate tax conference committee is much more modest. The thought of reducing the sales tax rate apparently has been dropped.
Instead, the aim is to raise enough additional sales tax revenue to allow some now-taxable purchases to be exempted.
"Some powerful economic incentives" could be provided in that fashion, Bakk said. While he did not spell out what incentives he has in mind, a sales tax exemption for construction materials has been part of the Legislature's discussion about how to support a major expansion by the Mayo Clinic and a new research lab at 3M.
In addition, new sales tax revenue might be used to allow the state to relieve local governments from paying sales taxes. That would in turn result in property tax relief in which businesses and homeowners would share.
But if Dayton and the DFL-controlled Legislature is again targeting business services for taxation, I'd bet that the thought of somewhat lower property taxes won't mollify the affected businesses.
