Gov. Tim Walz wants to tax people when they get financial and legal advice, a proposal that critics say hurts vulnerable residents while leaving businesses unscathed.
“The proposal would be extremely detrimental to the Minnesotans who can least afford it, especially during the most stressful, challenging and unexpected moments of their lives,” said Samuel Edmunds, president of the Minnesota State Bar Association, in testimony before the Senate Taxes Committee on Tuesday.
But Walz’s revenue team says it would make the state tax system fairer, plus add over $200 million a year to state coffers, even as the governor’s budget also would slightly decrease the state’s sales tax rate from 6.5% to 6.425%.
“Cutting the tax rate and broadening the base to include professional services will help right-size our sales tax to a more service-oriented economy,” Shane Delaney, an assistant commissioner at the Minnesota Department of Revenue, wrote in an email to MinnPost.
The prospect of a sales tax expansion illustrates the unpleasant decisions facing Walz and the Legislature as they hammer out their two-year budget that would begin in July. The Senate and House are debating the governor’s budget proposal amid forecasts the state is veering from a net surplus in its next budget to a deficit four years from now. And that’s without factoring in the looming threat of Minnesota losing billions of dollars in federal money under the Trump administration and a Republican-controlled Congress.
At the Taxes Committee hearing, Sen. Carla Nelson, R-Rochester, acknowledged the “tough spot” Paul Marquart, the Revenue Department’s commissioner, is in.
But Nelson also called the tax on advisory services “regressive” and “not a good policy.”
Under the plan, a Minnesotan who purchases accounting, banking, financial brokerage or legal services would pay state sales tax.
