Minnesota's local sales tax

Comparing with many other states, Minnesota’s local governments have much higher reliance on local property taxes, less so on local sales and use taxes. As of 2004, general local sales taxes exist in only 10 of Minnesota’s 853 cities and in only one of the 87 counties (Cook County).

In 1971, while the state general sales tax rate was increased to 4 percent as part of the “Minnesota Miracle," the legislature enacted a prohibition against new or increased local taxes on sales or income (M.S. 477A.016). According to the report, "Minnesota's Local Sales Tax (2004)," state policymakers have been reluctant to provide broad authority for local-option sales taxes or other local revenue sources out of concern over the uneven distribution of revenues across communities. However, this concern may not be necessary. My recent article on Public Budgeting and Finance shows that, in Georgia, although local options sales tax (LOST) is more unevenly distributed than property tax, adding LOST to the property tax has actually reduced the original level of fiscal disparities -- because the two taxes have different patterns of spatial distribution.