SAINT PAUL, MINN. – A new House Republican tax bill that was heard today in the House Taxes Committee would raise billions in taxes on middle-class Minnesotans while giving huge tax breaks to the wealthiest Minnesotans. HF 3594, the so-called “Fair Tax,” which is authored by House Republican Property Tax Division Chair Steve Drazkowski, and co-authored by House Taxes Chair Greg Davids, would eliminate all income and corporate taxes on Minnesotans and businesses and replace the lost revenue with a massive expansion of the sales tax, potentially doubling the sales tax rate and expanding the sales tax to everything from food and clothing, to child care services and prescription drugs. House DFL Leader Paul Thissen said the proposal is a confirmation of Republican priorities that are putting corporate special interests ahead of ordinary Minnesotans.
“This Republican tax bill is a dream come true for millionaires, but it’s a nightmare for ordinary Minnesotans,” said House DFL Leader Paul Thissen. “We should be helping reduce prescription drug costs and child care costs, not increasing them! It is disturbing that with less than five weeks to go in the session the House Republican Tax Chairs are making it a priority to consider an extreme bill that would raise taxes on ordinary Minnesotans.”
According a revenue note from the Department of Revenue, the elimination of the income, corporate, and many excise taxes, would remove 60% of the state tax base in Minnesota. The report indicates that the sales tax rate would likely double in order to cover the lost revenue. Many products would be taxed for the first time in state history, including essentials for Minnesota families such as food, clothing, rent, and home heating fuel. Minnesota would become the first state in the nation to tax prescription drugs and only the sixth state in the country to tax groceries.
Many services would be taxed for the first time as well. Child care services, medical services, legal services, and accounting services would all be subject to a sales tax under the Republican plan.
A study from the Institute on Taxation and Economic Policy looked at the impact of replacing the income tax with a sales tax on the national level, and its effect on the states. It found that the bottom 80% of Minnesotans would pay about $3,000 more on average.
House Deputy Leader Paul Marquart said the bill would harm seniors already struggling with the high cost of prescription drugs, and young families who are struggling with the high cost of child care. It would even tax girl scout cookies.
“We should be making child care more affordable for families and this would do the opposite, putting a tax on everything from diapers to child care services,” said Marquart. “It’s a reverse Robin Hood tax that takes from low and middle income Minnesotans in order to provide massive tax breaks for the wealthiest Minnesotans and businesses. It’s wrong and not something that Minnesotans would support.”
The House Republican tax plan is extremely regressive, meaning low and middle-class Minnesotans would pay a larger percentage of their income in taxes than wealthier Minnesotans. Thissen said the plan would roll back positive efforts in recent years to make Minnesota’s tax system more fair.
“Just like the Republican omnibus tax bill, which cuts the taxes for the owners of skyscrapers, House Republicans are showing their true colors with a proposal that would benefit the rich and starve the middle class,” said Thissen.
Testimony was taken on HF 3594 in the House Taxes Committee and it was laid over.
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