One of the most controversial and highly-publicized components of the tax bill approved by the Minnesota Senate on Monday is the push to tax clothing -- but many are pushing back.
The opponents and retailers argue adding sales tax to clothing sales would hurt Minnesota since millions travel to the state just to buy clothes because they can save money.
The Mall of America is among those battling the current bill because more than half of the purchases contributing to their $2 billion revenue come from tourists, and they are concerned they could lose those customers if the tax is signed into law.
Yet, advocates of the bill argue that most states tax clothing and the move could help the state bridge a budget gap. Furthermore, they contend it is not a tax on the lower and middle income shoppers who do not purchase high-cost clothing items.
Current estimates suggest customers would pay an additional $541 million in sales tax over the next two years if the move is approved.
FOX 9 News spoke with former Democratic lawmaker Ember Reichgott Jung and Republican strategist Ben Golnik about the tax and its possible impacts. Watch the video for more information.
One person who supports the Senate's tax plan is Ember Reichgott Junge, a former Democratic State Senator. Ben Golnik does not support the bill, he's a Republican strategist and Chair of the Minnesota Jobs Coalition.
Heidi Collins: "Ember, this is a sacred cow in Minnesota, especially with the Mall of America here. It has a lot of people upset, from shoppers to the tourism industry. So, how do you argue that this is a good idea for our state?"
Ember Reichgott Junge: "Well you already said it, said one of the things; we are only one of four states that does not tax clothing. So that's number o9ne. Number two is, you have to think about it in a larger context. What we are doing here in this Bill is lowering the sales tax to 6 percent which is the lowest rate in 22 years in the state of Minnesota and broadening it out on some services and clothing. Now way are we doing that, because it's going to cause stability for the budget for the state of Minnesota. And that's most important of all."
Heidi Collins: "Ben, 90 percent of this country taxes clothes. It isn't shutting down business after business in those 45 other states.
So, why not do it here?
Ben Golnik: "Absolutely not. If you look at this tax hike the Democrats passed today, it was nearly two billion dollars in new taxes so they're covering a budget shortfall of about 600 million dollars with three times that in new revenue and their trying to balance the budget on the backs of the middle class. Governor Dayton and these Democrats didn't run on taxing the middle class or the folks that are the working poor, they ran on taxing the rich and all this does is try to balance the budget on the backs of the middle class."
Heidi Collins: "So are you saying that because we don't have tax on clothing we are somehow better than other states by the way of how we take care of our monies? "
Ben Golnik: "Well I think that as it relates to the Mall of America. I think absolutely. I think that it's a competitive advantage for them. If you look at some of our border cities, um Moorhead as an example people come over from Fargo to shop in Moorhead. We'll lose that competitive advantage if all the sudden we decide to hike taxes on clothing."
Heidi Collins: "What about a competitive advantage because there is something that is difficult to have in this country.
Ember Reichgott Junge: ""Well first of all it's important to note that regarding the middle class that there is a tax rebate for those people who earn less money. So if you're a family of four earning 46,000 dollars a year, you will be basically getting a credit of up to one hundred dollars. So you can but about $1700.00 worth of clothing without paying a nickel.
Heidi Collins: "Sounds so complicated...."
Ember Reichgott Junge: "Well it's not in the sense that you're really protecting it's targeted to those that can afford. If you can pay a little tax then they'll pay it but the lower income folks are protected."
Ben Golnik: "I think we've heard about that but it gets complicated to your point. I mean if you have a sale for $99.99, if you have suit, you'll probably see the pants and suit jacket sold separately. So I think it's just simply too complicated and again I go back to I think most think the state has enough money coming in. I mean why are we raising nearly two billion in new taxes to cover a deficit that's about a third of that? I think we need to look at those spending decisions. "
Heidi Collins: "So you're saying that we need to lower spending and this is really a national debate. I mean we're talking about this all across the country, lowering the spending instead of increasing the taxes."
Ember Reichgott Junge: "Now what we're talking about is long term stability for a budget so that we can invest in education have a better public education system and that we can have lower tuition and so that we can have property tax relief. Now you can have a combination of taxes but you know what... Our economy is a service based economy now and we need to broaden the base after we lower the rate and that is going to be what gives us the stability going forward. Clothing is an additional part that should have been in the mix long ago."
Heidi Collins: "We don't want to start getting on too many more lists though because I know we're toward the top of the list when we talk about property taxes and really near the top of the list for income tax as well. So, where do we want to be with the State of Minnesota? I think that's some of what we're hearing Governor Dayton say?"
Ben Golnik: "That's right and Governor Dayton interestingly enough initially proposed putting sales tax on the clothing and other services. He ultimately backed away from that because it was so unpopular with the public. I think the polling's show that as many as 2/3 or 3/4 of the people oppose this tax. So I don't think it's good policy, I certainly don't think it's good politics for the democrats that are now going to fight internally Governor Dayton says he doesn't support this senate democrats do, House Democrats aren't proposing this so...It will be very interesting to watch the Democrats fight this out. "
Ember Reichgott Junge: "Recent polls show that the Minnesotans support a mix of tax increases and spending cuts and that's what they are going to have in this package. They also support higher income taxes on higher income earners and SIN taxes. So, you put that in with some of the sales tax expansion and you will have the stability so that we can have a state that does work once again."
Heidi Collins: "Hopefully. Such an interesting day, we we're voting against it and then for it and against it and for it-so we're going to follow up on this story obviously. Thank you both."