'Fair Tax' proposal gets hearing at final taxes meeting

It’s an idea that some in the House Taxes Committee think is at least worth exploring. Called a “Fair Tax,” it would do away with most taxes and replace them with a consumer tax on just about everything.

The concept is being heard in several states, and Rep. Steve Drazkowski (R-Mazeppa) sponsors HF3594 that would put the framework in place for “Fair Tax” implementation in Minnesota.

Rep. Steve Drazkowski

It was heard on an informational basis only, during what is expected to be the committee’s last meeting of the session. The bill’s companion, SF3441, sponsored by Sen. Dave Thompson (R-Lakeville), awaits action by the Senate Taxes Committee.

The bill would eliminate most taxes, including alcohol and tobacco taxes, and establish a framework for replacing them with a very broad state sales tax, according to a summary prepared by the nonpartisan House Research Department. Based on a formula, a monthly credit would be paid to people living at the poverty level based on household size.

If implemented, sales taxes would not only be expanded to most consumer items, but also most services, including child care.

Supporters say a “Fair Tax” would do away with tax deductions and carve outs, including mortgage interest deductions.

“It is a good idea, it is simple … it would incentivize people to work and to save, rather than the current incentives to working less and the spending that the income tax code provides. It would close many of the things that people on both side of the aisle consider tax loopholes,” Drazkowski said.

Critics say implementation of the tax would create an inordinately high consumer tax that would most likely mean less revenue to the state’s General Fund. Rep. Linda Slocum (DFL-Richfield) expressed concern that senior citizens would be hit hard as the bill proposes a tax on rent and medication.

Rep. Greg Davids (R-Preston), the committee chair, said the concept “is most likely a federal issue. I’m not quite sure mechanically how it would work if one state did it and no other states did. This is a concept bill. We’re not laying it over; we’re not voting on it; this is certainly not the position of the House GOP.”