Tim Pawlenty on Taxes

Last Updated : Aug 11, 2011

Minnesota Taxes

Minnesota has both a state income tax and a state sales tax. The numerous other taxes coming into the general revenue fund include tobacco, alcohol, corporate, and property taxes. The general revenue made up roughly 50% of all revenue in Minnesota for the 2010-2011 biennial. Of the general revenue fund for 2010-2011, 53% came from income tax, 30% from the sales tax, and the remainder came from the property, corporate, alcohol, tobacco, and other taxes.

 

Cost of Government

The cost of Minnesota's state government on it's citizens is roughly 16% of their overall revenue. The rate peaked in 2006 at 16% and hit a low in 2003 at 15.4%.

 

Minnesota State Income Tax

 

Minnesota State Sales Tax

Minnesota first imposed a state sales tax August 1, 1967. At that time the rate was 3 percent. The state last increased the rate in 2009. Below is a table showing how the rate has changed over time.

Period Rate
August 1, 1967 – October 31, 1971 3.0%
November 1, 1971 – June 30, 1981 4.0%
July 1, 1981 – December 31, 1982 5.0%
January 1, 1983 – June 30, 1991 6.0%
July 1, 1991 – June 30, 2009 6.5%
July 1, 2009 – Present 6.875%

The 1991 increase was initially enacted as an “optional” county sales tax rate on top of the 6 percent state rate. All counties imposed the tax because of aid penalties if the tax was not imposed. In 1994, this “optional” tax was officially rolled into the state tax rate.

The 2009 increase resulted from a state constitutional amendment imposing an additional three-eighth cent general sales tax, which the voters approved at the 2008 general election. The rate increase is effective for 25 years with the revenues
dedicated to funding outdoor heritage, clean water, parks and trails, and historical and cultural heritage. 

Of the 45 states and the District of Columbia that impose a sales tax, six other states have a tax rate higher than Minnesota. The states are:

  • California 8.25%
  • Mississippi 7.0%
  • Rhode Island 7.0%
  • Tennessee 7.0%
  • Indiana 7.0%
  • New Jersey 7.0%

Minnesota’s tax rate is higher than all neighboring states. Although Minnesota has a relatively high tax rate, it also has one of the narrower tax bases because it does not tax clothing, food for home consumption, or a number of services. All the other states in the region impose sales taxes on clothing. South Dakota also taxes food for home consumption. South Dakota and Iowa tax a number of services not subject to the Minnesota sales tax.

Sales of motor vehicles are exempt from the general sales tax and are instead subject to the motor vehicles sales tax (Minn. Stat., ch. 297B). The motor vehicle sales tax rate remains at 6.5 percent since it was not increased as part of the 2008 constitutional amendment.

Both short- and long-term leases of motor vehicles are subject to the 6.875 percent general sales tax, instead of the motor vehicle sales tax. In addition, short-term motor vehicle rentals (defined as a lease or rental of no more than 28 days) are subject to an extra tax of 6.2 percent and a 5 percent fee. The combined sales tax rate and fee on short-term motor vehicles is 18.075 percent but the rental companies retain the revenue from the 5 percent fee to offset their payments of motor vehicle registration taxes.

In 2000, the state allowed 12 local governments to impose a local sales tax, mainly to fund specific capital projects. The rates were either 0.5 or 1.0 percent. In recent years the number of authorized local sales taxes has grown. All counties located in the seven-county Twin Cities metropolitan area may now impose a 0.25 percent sales tax to fund transit improvements (five of the counties do), while the remaining 80 counties may impose up to a 0.5 percent sales tax to fund specific transportation projects (currently none have imposed the tax). An additional 27 city and county local sales taxes are also currently imposed.

The combined state and local sales tax rates in Minnesota range between 6.875 and 7.875 percent. The city of Duluth and Cook County have the highest combined rate at 7.875 percent. The city of Minneapolis has a combined rate of 7.775 percent while the rate in the city of St. Paul is 7.625 percent.

(This text was taken from the official source)

 

Plan for Tax Cuts, Spending Restraints

In February of 2010, Governor Pawlenty issued a press statement and cited a news story in which he outlines his plan to reduce taxes and reign in spending for the state of Minnesota. The plan included 

  • a 20 percent reduction in the corporate tax rate
  • a 20 percent exclusion from taxation for small businesses
  • a capital gains exemption for qualifying investments
  • a spending cap that would limit state outlays to the amount of revenue collected in the previous budget biennium
  • a tax credit to provide incentives for investment in early-stage companies

 

Tax Cuts 

In April of 2010, Governor Pawlenty released a statement noting that the state of Minnesota did not need to raise taxes to address any fiscal shortfall.

 

Meet the Press Across America Interview

In May of 2010, Governor Pawlenty was interviewed by Meet the Press Across America. He was asked about when he would raise taxes in the context of reigning in the debt problem, and states that he cuts taxes as Governor of Minnesota.

 

AJC Interview

In June of 2011, Governor Pawlenty was interviewed by AJC.com and was asked about taxes and possibly reforming the tax code. Governor Pawlenty expresses his desire to see loopholes in the tax system closed and the overall system simplified.

 

Veto of DFL Tax Plan

In September of 2010, Governor Pawlenty issued a press statement noting his intention to veto legislation that was being proposed by the Democratic party of Minnesota. The legislation would raise taxes to balance the state budget.

 

References

[1] Website: National Journal.com Article: Pawlenty Outlines Jobs Plan Author: Maura O'Brien Accessed on: 08/03/2011

[2] Website: Minnesota Comptroller Article: Minnesota income tax rates Author: NA Accessed on: 08/03/2011

[3] Website: Minnesota House of Representatives Article: Individual Income Tax Author: NA Accessed on: 08/03/2011

[4] Website: Minnesota Management and Budget Article: Budget Information Author: NA Accessed on: 08/03/2011

[5] Website: Minnesota House Research Article: State Sales Tax Author: NA Accessed on: 08/03/2011

[6] Website: AJC.com Article: Transcript of my interview with Tim Pawlenty (June 2011) Author: Kyle Wingfield Accessed on: 08/11/2011

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