The Dems' Sales Tax Shakedown

In the previous edition of The Column, I mentioned the 400-page tax bill passed by the Minnesota state legislature in the waning seconds of their 2013 session.  As everyone understood, we are still unpacking all the unpleasant surprises within the bill that nobody read.  The latest victim is the state's warehousing industry.

The Minneapolis Star Tribune reports today that "Warehousing firms cry foul over new Minnesota taxes,"

"Most Minnesota businesses dodged a sweeping expansion of the sales tax, but not logistics firms.  The final version of the tax bill, approved moments before the end of the legislative session last week, included an expansion of the sales tax on a handful of unlucky industries. One of them is warehousing and storage."

It seems that Minnesota had not previously taxed warehouse services, nor has any other state.  The reaction of the state’s warehouse industry is to consider decamping to less hostile locales, such as Des Moines and Kansas City.

The reaction of the Democrats in charge of the legislature is to…blame the victim.  The Star Tribune quotes State Sen. Ann Rest—Democrat and Tax Reform Committee Chair—as saying,

“warehousing, equipment and machinery repair and telecommunications equipment companies should have taken the initial proposal more seriously, she said.

“Those proposals were on the table for months,” she said.

All of the other industries had their lobbyists at the table, the Star Tribune notes, and negotiated their way out of the sales tax.

Give Sen. Rest points for directness.  Usually shakedowns are delivered in more subtle forms, like the classic “nice little warehouse you have there” or cryptic discussions on notions of honor in the late Roman Empire.

Warehousing mistakenly took comfort in never having been subjected to such a tax, here or in any other jurisdiction.  And now, for those same reasons, no one has any idea as to how such a tax can be implemented.  Sen. Rest’s suggestion for warehouse firms?

“If I was one of them, I’d be feeding [Revenue] Commissioner [Myron] Frans all kinds of information.”

Of course.  That’s how it works.  It’s the affirmative obligation of the taxpayer to assist in his or her own taxation. 

As it stands, the warehouse industry has two choices: pack up and leave or submit to the system of tribute like any other “regulated” industry:  contribute to election campaigns, hire the plugged-in lobbyists (usually former legislators or staffers) and show up to every committee meeting next year, bowing and groveling alongside the other supplicants.

Neither choice will produce good results for Minnesota.  One of the long-lasting lessons I took from my two-decades-old business school education was the importance to the economy of the unglamorous industries that go under the labels “logistics” and “supply-chain management.”  With our just-in-time business world and consumers that demand everything be delivered overnight, commerce depends heavily on the infrastructure that sits just off-stage, behind the curtain.

Wealthy nations such as America and Japan depend on world-class infrastructure in the highly-visible form of roads, bridges, and airports and also on unseen infrastructure like warehouses, transfer stations, and inter-modal hubs.  Move critical bits of the supply chain one or two states away, and the whole system breaks down, or just creeps along, strangling the economy.

The other option—paying the tribute—is even worse.  It will raise costs to consumers just as surely as the sales tax will.  America is a transcontinental empire founded through a revolt over sales taxes that began at a remote colonial port on the edge of a vast wilderness.  Jefferson’s Declaration of Independence included these items among the bill of particulars indicting His Majesty’s Government,

He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our people and eat out their substance.

For imposing Taxes on us without our Consent.

I’ll let Jefferson have the last word,

Governments are instituted among Men, deriving their just powers from the consent of the governed.