A senator with a solution

By Joe Spear
Free Press Editor

I spoke with Minnesota Senate Tax Committee Chairman Tom Bakk Thursday morning about the state tax system and his unique plan for solving the state budget deficit.

To me, the plan is not only sound economically but also quite possible politically, if he gets the right kind of support.

His plan fills part of the budget hole, pays schools back the money the state is "borrowing" from them and lowers the overall sales tax rate in Minnesota. In the process, the plan actually reduces the tax burden on businesses.

The heart of his plan calls for initially expanding the state sales tax to clothing, to provide about $257 million help reduce the current $1 billion deficit. Then, starting in July 2011, $120 million a year would go to pay back schools the $1.2 billion in funding unalloted from last year.

At the same time, the other $120 million would help pay for a lower overall sales tax rate.

He reasons that businesses will see their tax bill go down as a result. Businesses pay about 45 percent of all sales tax in Minnesota, according to the Department of Revenue.

Lowering the sales tax rate and broadening the base has been recommended since 1984 by bipartisan tax study commissions in Minnesota. Even Gov. Pawlenty's 21st Century commission recommended the idea.

Republican Sen. Debbie Johnson of Ham Lake has signed on as a co-author of the bill.

This stands as a really great chance to improve Minnesota's tax climate and solve the budget deficit with minimal amounts of pain.

The sales tax will not be as onerous on hurting consumers because it is a tax of choice. If you don't want to pay the tax, you don't have to buy the product.

Bakk's research also shows that sales tax falls more on upper income individuals who maybe buy fancy suits versus those who may use thrift stores and discount stores.

This proposal is one of the best solutions for our current dilemma and has the added advantage of sound structural reform for Minnesota's tax system.

Bakk, the Iron Rangers who is also running for governor, now just has to be as good as garnering support as he is about coming up with good ideas.