Newspaper Tax Strikes Out, Twice   

Tax to build stadium doesn't get off ground in Minnesota

With the state of Minnesota facing a $2 billion budget deficit earlier this year, Gov. Jesse Ventura had a creative idea to balance the books. He proposed extending the sales tax--6.5 percent statewide, 7 percent in some cities--to many currently exempt goods and services, including the sale of newspapers and magazines.

Some viewed the proposal as an effort by the pugnacious Ventura, who simultaneously professes to loathe the media while craving its attention, to exact some revenge on his perceived enemies in the local press. But Ventura spokesman John Wodele says Ventura's ideas were based on a report from the state's Department of Revenue on ways to broaden and stabilize sales tax collections.

In any event, Ventura's idea didn't get far. Minnesota lawmakers pinned the former wrestler's plan to the mat in February, passing a different budget package. But the idea of a newspaper tax resurfaced in March, as part of a strategy to pay for a new Minnesota Twins baseball stadium. The Committee on Taxes in Minnesota's House of Representatives approved the proposal, which also included new hospitality taxes for the stadium's host city and called for putting the issue before voters in a referendum.

One of the bill's sponsors, State Rep. Dan McElroy, a Republican from the Minneapolis suburb of Burnsville, says the idea was hardly radical--other states tax newspapers. "Arguably at least, newspapers are the only form of news delivery that's not taxed [here]," says McElroy. "If I buy the Los Angeles Times in Los Angeles I pay tax on it, and if I buy it in Minneapolis, I don't pay tax." The plan called for taxing newspaper circulation, both subscription and newsstand sales.

Local newspaper advocates didn't like those headlines. Linda Falkman, executive director of the Minnesota Newspaper Association, says, "We just think it's an extremely ill-conceived idea and not legitimate as a way of funding a stadium. We can't see the logic of it. A newspaper is different from another service: It's taxing a free press." Falkman says the new tax would only serve to decrease circulation, particularly in rural Minnesota. The MNA counts 375 members, ranging in size from the Minneapolis-based Star Tribune to the weekly Buffalo Ridge Gazette of Ruthton on Minnesota's western plains, which circulates to a few hundred people. Many publishers wrote to lawmakers objecting. (Ventura also frowned on the scheme: "He believes that it would be inappropriate to enact the new tax to build a baseball stadium," says Wodele.)

Nationally, there is no standard for newspaper taxes. According to statistics tracked by the Newspaper Association of America, 17 states and the District of Columbia levy taxes on newspaper circulation income. Some states also tax advertising, newsprint and preprints. But no one's ever used the money to buy a ball field.

"That was a whole new twist," says Liz Wooten, NAA's manager of state affairs. According to NAA figures, Minnesota is among 25 states (including states without a sales tax) that do not tax newspaper circulation or the other taxable media accoutrements.

Within a week after the legislative committee approved the plan, the tariff idea was clipped – and not saved. As of mid-April, lawmakers had not decided how to pay for a stadium. "The newspaper tax was no longer necessary. It had a shelf life, I think, of six days," says McElroy. Still, he speculates that the idea of taxing the fourth estate could return as part of a broader effort to expand the base of the state sales tax.

Wooten says lean economic times are prompting more states to reconsider their tax-free papers. "I do anticipate this being a continuing issue for our industry," she says.

So Falkman and her Minnesota members remain steeled for battle. "We certainly will be vigilant in future sessions," says Falkman. "We will be vigilant next year as well."