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Gunther to bring sales tax to State

FAIRMONT — State Rep. Bob Gunther, R-Fairmont, says he will carry the city of Fairmont’s possible half-cent local option sales tax to the Legislature, where it could raise eyebrows this year.

The Legislature reconvenes Feb. 11 and cities growing use of sales tax revenue is an issue that may be in the spotlight.

The Star Tribune of Minneapolis last week reported that more Minnesota cities are imposing local sales taxes than at any time in history. Local taxes are added to the existing state sales tax of 6.875 percent.

Last session, lawmakers with concerns about the trend changed state law to require cities to specify projects they will fund with the revenue, trying to ensure a broader significance to the regions around the cities. Cities also must now get legislative approval before taking the idea to voters.

Fairmont has an existing half-cent local option sales tax in place. It generates about $600,000 per year, with the funds earmarked for a community center.

Recently, the council decided to take the first steps toward an additional half-cent sales tax, with the money going toward street improvements. The city faced a Jan. 31 deadline to get the required paperwork into the hands of the appropriate legislative tax committee chairpersons.

Should the city’s proposal make it through the Legislature, it would return to face Fairmont voters in the fall. Then the City Council would have the final say on the matter.

The Star Tribune noted lawmakers’ concerns that local option sales taxes may foster inequality among communities. They say cities with more retailers will simply benefit more. Lawmakers also have concerns about undermining the local government aid program, which involves the transfer of state funds to cities through a formula.

Gunther, while noting the recent hubbub about local option sales taxes, said lawmakers have yet to slow them down or stop them. He said he is willing to carry Fairmont’s proposal because it includes the step that it will go back to voters for their input.

What concerns Gunther is the possible effect of piling up sales taxes on the local business community, and whether it could make Fairmont less competitive for attracting shoppers.

Gunther noted that Martin County also has the option to add a half-cent sales tax if it chooses to boost its road budget.

“Is 1 1/2 percent too much?” Gunther asks about the combination of added sales taxes people could end up paying in Fairmont.

Martin County Coordinator Scott Higgins said county commissioners have had off and on discussions about the sales tax option, while consistently asking the state to provide counties with an enlarged and stable source of funding for infrastructure projects. What the county has actually implemented is a “wheel tax,” which amounts to $10 per vehicle per year and raises from $200,000 to $220,000 annually. Higgins said a sales tax has not been up for discussion recently.

Were the county to approve such a tax, revenue from it would have to go toward county roads. This would benefit Fairmont to some extent, as there are county-state aid roads in town. However, the county could not devote funds to city streets, as the City Council is looking to do.

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