Ventura details his tax-reform proposals

ST. PAUL -- Gov. Jesse Ventura sent letters to Minnesota's 201 lawmakers this week, committing himself to the broad tax-reform principles he has floated over the past few months.

"The budget I will present to the 2001 Legislature will focus on tax reform and tax relief," he wrote in the letter made available to reporters Friday afternoon.

The governor had left for the day and was unavailable for questions or comments on the letter, a spokesman said.

The document mostly was a rehash of concepts Ventura already said he supported, but it did wed him to the proposals that in the past he had simply characterized as "possibilities." It didn't provide specifics.

"Everyone wants to know how much taxes will be cut in total," Ventura wrote. "Those numbers will come soon."

Among the overarching goals to which Ventura has tied himself:

-- State funding for 100 percent of the K-12 general education formula, shifting $900 million from property tax levies by local school districts.

-- Significant reductions in property taxes on business and rental housing.

-- Broaden Minnesota's sales tax base to include services as well as goods, while continuing to exempt life essentials like food, clothing and heating fuels. Expand sales tax exemptions for business equipment and materials.

-- Propose that in the future, Minnesota relies more on the sales tax, and reduces the property tax, income tax, and motor vehicle registration tax.

-- Reallocate some existing general purpose aids to formulas that more clearly reflect local needs and resources, as well as specific areas of state responsibility and shared state and local responsibility. Exempt local governments from the requirement to pay a state sales tax on their purchases.

-- Reduce the state sales tax to as low as 5 percent, while broadening it by taxing some services.

Minnesota's sales-tax rate now is 6.5 percent. Food, clothing and most services are exempt.

"Our sales tax was built and designed on the late 1960s economy," Ventura wrote. "It is riddled with exemptions and ignores a huge segment of our economy."

Ventura has said service industries account for 60 percent of the economy, but pay only 40 percent of the tax revenue.

And the sales tax now is applied unevenly. Some services are taxed, including dry cleaning and lawn care, while others are exempt, including legal services and car repairs.

"I believe the tax reform proposal will be the most challenging decision you will make this legislative session," Ventura wrote.

Senate Majority Leader Roger Moe, DFL-Erskine, agrees with many basic components of Ventura's plan, but said he had reservations about overhauling the whole tax system at once.

"How much of that can we bite off?" Moe said.

Senate Tax Committee Chairman Doug Johnson, DFL-Tower, championed a similar sales tax on services a decade ago, and earlier called Ventura's proposal "an administrative, legal and political nightmare."

House Majority Leader Tim Pawlenty, R-Eagan, has said he worries the plan could result in some services leaving the state.

Pawlenty and House Speaker Steve Sviggum, R-Kenyon, are wary of expanding any tax at a time when the state's surplus is projected at more than $3 billion through 2003.

"We ought to be about cutting taxes on families and working people, not extending them to other areas," Sviggum said. "I think that would send a mixed message to the taxpayers of the state."

Ventura said broadening the sales tax would help the state pick up 100 percent of the basic costs of K-12 public education, a proposal he put forth in September.

That education funding proposal would for the most part take schools off the local property-tax bills. The sales tax extension would only pay a portion of the $900 million per year that would need to be made up.

Additional money could be raised by other parts of the plan: a statewide uniform property tax on businesses and cabins and a shift of state aid from cities and townships to schools, for instance.

Sviggum said he wants assurances that if the state picks up 100 percent of the basic costs of education, it won't try to make all the decisions about what happens in local schools.

Revenue Commissioner Matt Smith said even with the new tax, businesses and seasonal property owners would "still get significant property tax relief."

On the Net: http://www.governor.state.mn.us