Twin Cities Tax Revamp: Housing and Transit Get a Boost

On July 26, 2023, the Minnesota State Capitol building will be displayed in St. Paul. In order to fund housing and transit, the Twin CitiesPhoto byKerem Yücel

Starting this Sunday, consumers in the Twin Cities metro area will notice a slight increase in prices due to a new sales tax hike. Anoka, Carver, Dakota, Hennepin, Scott, Ramsey, and Washington counties will experience a one percent tax rise.

Essentially, for every $100 spent, an additional $1 will be added to the receipt. However, it's important to note that groceries, clothing, and prescription drugs will remain exempt from these sales taxes.

This tax increment was initiated during the recent legislative session, where lawmakers approved local sales tax funds to bolster transportation and affordable housing initiatives. Over the next four years, the revenue from this sales tax increase is anticipated to reach $2 billion.

A portion of this sales tax increase, specifically a quarter-cent, is designated to address housing concerns. This segment will be allocated to two significant areas: a new state rental assistance program, creating up to 5,000 rental vouchers statewide, with 3,000 specifically for low-income renters in the metro area. The other portion will fund the construction of new affordable homes through city and county aid.

Ben Helvick Anderson, the Vice President of Policy and Organizing for Beacon Interfaith Housing Collaborative, highlighted the pressing need for housing vouchers in Minnesota. He emphasized that only one out of four people eligible for Section 8 vouchers can obtain them, leading to a significant demand that affects the entire housing sector.

While individuals like Theresa Dolata, who has firsthand experience with homelessness and housing insecurity, believe the funding could have been more substantial, they acknowledge its potential to assist many Minnesotans. Dolata expressed her sentiment, stating that they might not have received everything they wanted, but the fight led to meaningful progress.

On the contrary, John Reynolds, the State Director of the National Federation of Independent Business, raised concerns about the negative impact of these tax hikes on small businesses. He emphasized how these increases affect the profits of local shops, especially considering that even though inflation has slowed, prices haven't decreased. Moreover, he pointed out the regional competitiveness issue, particularly with neighbouring states like Wisconsin, where prices are notably lower.

Reynolds, aligning with Republican lawmakers, argued that these programs could have been funded from the state's substantial $17.5 billion surplus. He criticized the sales taxes as regressive, impacting both individuals and small businesses adversely.

Funding from the new 3⁄4-cent regional transportation sales tax will be divided between the seven counties and the Metropolitan Council. Key areas of focus for this funding include enhancing public safety on transit as well as expanding and improving transit services.