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Local Option Sales Tax Analysis for Elk River, MN 26 APPENDIX A: RESEARCH ON THE EFFECTS OF A LOCAL OPTION SALES TAX City of Elk River policymakers are understandably concerned that enacting a local sales tax will result in a loss of consumer purchases to neighboring counties that have not adopted the tax. At its highest potential application of half a percent, however, a local option sales tax would add 50 cents to a $100 purchase. The Minnesota Department of Revenue (shown below) records the tax collected from 23 Minnesota jurisdictions that have enacted a local sales or use tax within the last 10 years. Most of these cities show continued sales growth. A more specific comparison that includes three Minnesota cities that have adopted a .5 percent local option sales tax is also offered below. It is important to note that the tax does not add much to a consumer’s purchase. Decision-makers should decide on the best method to raise revenue— either an increase in property taxes or a 0.5 percent sales tax. Property taxes do not include a household’s current income, which raises the financial burden of low-income or retired homeowners. Sales taxes raise revenues based on household expenditures, which excludes the basic necessities of food and clothing. In addition, a sales tax raises revenues from non-residents who shop in Elk River. Policymakers should carefully consider each of the above factors before making a decision about enacting a local sales tax.