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Ventura says his sales tax plan won't hurt cities

Gov. Jesse Ventura believes that cities won't be hurt by his tax reform plan, and residents will benefit as they end up paying less overall. He is also convinced that overhauling the state sales tax is the best way to provide tax relief in other ...

Gov. Jesse Ventura believes that cities won't be hurt by his tax reform plan, and residents will benefit as they end up paying less overall.
He is also convinced that overhauling the state sales tax is the best way to provide tax relief in other areas, while making Minnesota a more competitive business environment.
However, some Duluth leaders do not support all the governor's initiatives and are still concerned about the impact on city finances.
Mayor Gary Doty came out publicly against the plan last month, and said Thursday he had not changed his view.
Ventura's plan calls for a number of simultaneous changes in the property tax system, state aid payments and the sales tax. The changes will affect city, county and school district property tax levies and expenses.
According to Revenue Commissioner Matt Smith, the governor's tax plan and budget hold city budgets harmless. He said they actually give cities more flexibility and accountability over both spending and revenues.
Smith said the bottom line is that the total property tax bill for city taxpayers will be lower under the governor's plan than it is today.
But getting there involves assumptions that some city leaders aren't comfortable with, though the figures used by both sides are pretty close.
Ventura's budget contains modest increases in local government aid (LGA), eliminates having local governments pay sales taxes on purchases, and reduces funding through the Homestead and Agriculture Credit and Aid Program (HACA).
"We eliminate the city's sales tax, which will then help their budgets tremendously because they're having to use some of their HACA and LGA money to pay sales tax," said Ventura on Tuesday. "Now they won't have to pay sales tax anymore to the state of Minnesota when they make purchases.
"So they come out for the better, all cities do, and the bottom line is you pay less in taxes."
That part of the plan found favor with City Councilor Ken Hogg, who testified at a recent House Tax Committee hearing in Duluth. He views eliminating the sales tax on local government purchases as a positive, but does not support trading it for a state aid reduction.
Doty estimated that sales tax has cost the city about $1.5 million each year.
Smith provided details on Ventura's plan, acknowledging that for 2002, it would require about a $4.9 million increase in the city's levy. Both Hogg and Doty have questioned the large property tax hike that would be required.
Figures from the city have varied, but the levy increase has been pegged at 35 to 45 percent. Smith, however, maintains that for property owners the difference would be made up by reduced school taxes and other levies.
The expanded state sales will replace the funding shifted away from schools. Ventura believes it's a much more stable tax that treats everyone equally. In fact, Ventura favors a uniform sales tax across the United States and would like to see it replace the income tax.
Ventura took it a step further and likened his plan to a pay raise for homeowners, who will have more money to spend after paying a smaller overall property tax bill.
"They're not looking to that side of the issue," he said. "Everyone in the state will get a pay raise on my budget."
Ventura also said the resistance to his budget plan was expected. "Everyone's always frightened of change," he said.

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