The Minnesota Bar Association has lashed out on the proposed tax on legal bills as a "misery tax" hitting people when they are in tough times. Advertising firms and accountants are warning of losing contracts to companies in other states if they have to charge prospective clients a tax.
Frans denied the administration had deliberately withheld the information to get a better sense of the political pressure spots. The rest of the budget was made public on Tuesday.
"This is a big change and contrary to popular opinion we were really working on this thing up until the last minute," he said.
What gets exempted has considerable ramifications. While business-to-business transactions will make up the bulk of the projected revenue, there are pockets of consumer purchases of services where a ruling one way or another could cost the state.
Not taxing personal care services now means the state is forgoing $102 million in revenue this fiscal year, according to a 2012 Revenue Department report. The lack of a tax on automotive repair and maintenance is a $135 million hit; the current legal service exemption is projected to cost the state at least $103 million in annual revenue.
All told, the present tax exemption on business services amounts to $3.2 billion and rising. Frans said Minnesota's tax system is outdated because people now spend more money now on services than taxable goods, a trend reversal from when the state first imposed a sales tax in 1967.
"We've neglected to have the tax code reflect the service economy we live in," Frans said.