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GOP bill to end cities' sales tax could ease LGA loss

Despite Gov. Mark Dayton's attempt to protect Local Government Aid in his proposed budget, Republicans legislators still have LGA firmly in their sights as part of a massive budget cutting plan.

So freshman GOP state Sen. Al DeKruif from Madison Lake has introduced a bill that might make the loss of LGA a little bit easier to take: He'd end the state sales tax on purchases by local governments.

According to DeKruif, cities and counties were exempt from the sales tax when first introduced in 1967. That ended in 1992, as a trade-off for continued state payments to local governments.

The federal government and most purchases by schools, public hospitals and nursing homes are still exempt, he said. 

Other exemptions have been made in law for fire trucks, police squad cars, ambulances, firefighters’ protective equipment, bullet-proof vests for peace officers, construction materials for correctional facilities, landfill equipment, and gravel and road maintenance machinery for townships, he said.

And he doesn't want to give governments an unfair advantage over private businesses, so the exemption wouldn't apply to "provision of goods or services by a city, county, or township that are generally provided by a private business and the purchases would be taxable if made by a private business engaged in the same activity."

Said DeKruif in a statement: “Governments shouldn’t have to pay taxes to other governments. It seems that we take hard-working people’s money, find a hundred different ways to summon it to St. Paul, and then send some back to cities as LGA and in various programs. In the meantime, through bureaucratic red tape and enforcement costs, value is lost.”

And, putting it into the GOP's overall perspective, he said expanding the sales tax exemption would help the state "move toward a smaller government way of thinking, less bureaucracy and reduced cost of government services for hard-working Minnesotans."

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