February 19, 2011

Ramsey County considering Vikings sales tax

Ramsey County officials are apparently exploring a half-cent sales tax hike as a funding mechanism for a Minnesota Vikings stadium, asking at least three state legislators if they'd support such a plan. "[They said], 'How'd you feel about a sales tax [increase]?', and I said, 'Not real good,'" state representative Carol McFarlane told the Minneapolis Star Tribune, before adding, "I'm being open-minded."

State representative Nora Slawik, meanwhile, said no specific sales tax figures were proposed, but said, "There are ways to structure it that I would be open to. In this economy, it's really important to look at any project that would bring in a lot of jobs, and I think the Vikings stadium has the potential to do that."

Okay, since you opened the door, Rep. Slawik, let's discuss the job impact of a half-cent sales tax increase. Back in 2006, the Kansas City Star noted that a 3/8 of a percent sales-tax hike would have the effect of taking $25 a year out of the pockets of county residents. If that holds true for Minnesota and scales proportionately — it's the weekend and I'm on a borrowed dodgy WiFi connection, so I don't have any way of easily checking at the moment — that means a half-cent sales tax hike would depress the economy of 500,000-person Ramsey County by about $16.5 million a year.

Not that I think taxes should never be raise, or even that sales taxes should never be raised (though they're both regressive and a bad thing to raise at a time when people still need all the encouragement they can to spend money). But in evaluating the economic effects of a project, you need to look at both the pros and the cons. One hopes that the Minnesota state legislature is smart enough to know this.