We applaud Minnesota Gov. Mark Dayton for his tax plan released this week. While we disagree with the governor on the scope and size of state government, he has chosen to tackle a sticky issue, namely that of tax fairness. He will need all the help he can get to move forward with this controversial but much-needed plan.
Dayton wants to extend the state sales tax, in order to eliminate unfair exemptions and to capture revenue from service transactions, such as paying for a haircut or lawyer. As things stand now, most goods are taxed but some are not. And services are not taxed. This system is skewed for no sensible reason.
As part of his plan, Dayton would lower the sales tax from 6.875 percent to 5.5 percent. The state can afford this because it would be taxing a broader base. Dayton's plan actually brings in more revenue, which means Minnesotans will pay more taxes overall. That is not great news. However, the structure of the tax system will be far better and far fairer than it is now. This should help eliminate annual budget battles at the state Capitol, among other things.
Another part of Dayton's plan seeks to make the state more competitive for business. He would lower the corporate tax rate from 9.8 percent to 8.4 percent, while closing some loopholes for businesses.
We have to disagree with the governor in two areas: He wants to raise taxes by 2 percentage points on the wealthiest Minnesotans. He also wants to raise the cigarette tax by $1 per pack, something that will fall harder on poor people. Targeted taxation like these proposals is inherently unfair, in that it undermines equal protection of citizens' rights. If a citizen can be singled out for punishment because of his earnings or habits, there is really no limit to what government may do.
We hope the Legislature makes the appropriate tweaks to the governor's plan, aiming for taxes that are broad, fair and low. We applaud the governor's initiative and desire to see a tax system updated for the age in which we live.