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The evolution of the Dayton tax plan

Wednesday, April 3, 2013

For the past few months, we have seen the tax plan of Gov. Mark Dayton go about interesting reforms. It began with speculation over the specifics of a reform to the sales tax, followed by staunch opposition, and some praise, to the general blueprint that Dayton presented. Finally, Dayton dropped the basis of the reform altogether in favor of the traditional progressive call for a heightened tax on the rich.

Although economists are in general agreement about the broadening of the taxable item base, given how it would reflect a more modern economy, they had a concern over business-to-business taxes, where services conducted for one business to another business would be taxed. The primary concern was over “tax pyramiding,” where a product goes through several stages of production from varying industries or businesses and, therefore, is taxed substantially. In fact, John Spry, a business economics professor at the University of St. Thomas, even went as far as to claim that “all economists agree” that the business-to-business tax is a bad idea, noting that “…I am still trying to find an economist who studies this area who thinks taxing business-to-business services is a good idea."

Originally published: 04/03/2013, Minnesota Daily