How Tim Pawlenty’s tax cut helps you

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Gov. Tim Pawlenty has floated the idea of a 1/8 percent sales tax reduction as part of his budget-balancing proposal. It may seem counter-intuitive to cut taxes in order to balance a budget, but Pawlenty was adamant that our fragile economy needed the kind of stimulus that could only be created by putting money back into people’s pocketbooks. Given that Pawlenty only has your financial well-being in mind, and not, say, demagoguing the DFLers when they propose paying for the things our state uses with taxes, I thought I’d take a look at how the Pawlenty tax cut will affect you, the taxpayer.

Opinion: How Tim Pawlenty’s tax cut helps you

On food, clothing, and medicine, the Pawlenty tax cut will save you $0.00 on all purchases. This is because Minnesota has no sales taxes on those items, and while it’s tempting to demand the state actually refund 1/8th of 1 percent on every purchase, it’s probably not going to happen, due to the nefarious liberals.

If you go to McDonald’s and spend $4.99 on an extra value meal, you’ll save $0.01. This adds up — if you go to McDonald’s five times a week, that’s a whole extra nickel. And over a year, why, it’s $1.35! Try not to spend it all in one place. After lunch, you might head out to Best Buy to pick up the new Shawnty Lo album. You’ll pay $12.99. But after tax, you’ll only pay $13.82 — a $0.01 savings from the $13.83 you otherwise would have paid. That’s a pretty sweet deal — buy 1,382 CDs, get the 1,383rd one free!

Now, what if your toaster breaks, and you decide to replace it? You might fork over $29.99 for a new toaster, $31.90 after tax. But that’s a four cent savings from what you would otherwise have paid! Now we’re getting somewhere! Put that together with the $1.35 you’ll save from your daily McDonald’s habit and you’ll have enough to super-size your meal at least two, maybe even three times over the course of the year!

Now, I know what you’re thinking: it doesn’t seem like purchases on everyday items are affected very much by this tax cut. But what if you need a big-ticket item? Well, yes, if you’re buying the big stuff, you’ll save some serious change. If you were to buy yourself a nice new computer, you might shell out $1,499.99 for it. After taxes, you’d be out $1595.61. But that’s $1.87 less than you’d have otherwise spent! Now we’re getting somewhere! On a $3,999.99 plasma TV, you’d save $5 on the nose — enough to buy yourself a value meal and save another penny!

Yes, if you’re the type of consumer that makes big-ticket purchases of electronics — not to mention yachts, where you could save $250 on a $200,000 purchase — you might actually see some benefit from Tim Pawlenty’s big tax cut.

Incidentally, Pawlenty did call for one tax increase on Friday. Well, not so much an increase, really, but a decrease in the property tax credit for renters, from 19 percent to 16 percent. Now, if you pay $950 a month for your 2-bedroom apartment, that will cost you an extra $342 next year.

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