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Part I -History and Current Tax Review History Minnesota is a relative newcomer to state and local sales taxes, especially local sales History taxes. About half the states adopted state sales taxes during the Great Depression, with most of the remaining states doing the same after World War IL It wasn't until 1967 that Minnesota adopted a state sales tax, becoming the second-to-last state to do so. The main goal of the new 3 percent tax was to provide an additional source of revenue to replace rapidly rising, increasingly unpopular, local property taxes. Increases in state aid to local governments and state budget problems largely explain the need for subsequent state sales tax increases. In 1971, the rate was increased to 4 percent as part of the "Minnesota Miracle"-a package of tax in- creases used to fund state aids to schools and other local jurisdictions. State budget problems in 1981, 1983, and 1991 boosted the state rate to 5, 6, and 6.5 percent, respectively. As part of the sweeping 1971 reforms, the legislature enacted a prohibition against Local sales tax new or increased local taxes on sales or income (MS. 477A.016). This signaled a prohibited clear preference for reducing local property taxes with state aids instead of new local-option revenues, and for maintaining some measure of control over local fiscal disparities. Under the prohibition, new local sales taxes were limited to those specifically authorized by state legislation, except for the general authority pertain- ing to new lodging taxes. At the time of the 1971 prohibition, five Minnesota cities had already adopted sales taxes on certain purchases. In 1969, by special law, Minneapolis had adopted a 3 percent tax on admissions, transient lodging, and amusements with live entertain- ment ("cabaret tax"), the proceeds of which could be used for general government purposes. In 1970, Bloomington, Duluth, and St. Paul adopted 3 percent transient lodging taxes by local ordinance or charter amendments. Bloomington also adopted a 3 percent tax on admissions to spectator events, and Rochester adopted a 3 percent tax on transient lodging in 1971.3 Until the 1990s, this prohibition meant few communities had revenue sources other than the property tax. In recent years, continued pressure for alternatives to local property taxes has increased the number of requests for legislation authorizing new local sales taxes. 3. Informational memorandum, Senate Counsel & Research, Jan. 22, 2001 1