Shopping in the Twin Cities to get more expensive this weekend due to sales tax hike

State of what you'll pay: The increases, which will generate hundreds of millions of dollars for affordable housing and public transportation, will bring the total sales tax rate above 8% in much of the metro.

• Rates in Minneapolis, Edina, Maple Grove, and St. Paul will hover at around 9%. The rate for hotels, which are subject to additional lodging taxes, will come in at more than 10% in some places.

How it works: The increases apply to goods and eligible services bought in the seven counties, as well as purchases made online or delivered to customers living in that area.

• Food, clothing, and medicine are exempt from all sales taxes in Minnesota.

What they're saying: Supporters say improving public transit and access to affordable housing is good for residents and the region's overall economy. Republicans have slammed tax hikes as excessive, , especially in light of the state's surplus, and some critics argue that they'll hit lower-income Minnesotans the most.

What we're hearing: Minnesota Retailers Association president Bruce Nustad told us that some store owners are growing concerned that shoppers will seek lower prices by buying elsewhere. That could be especially true for those located in the outer metro area, where it would be easier for residents to drive to a seller with lower sales taxes.

• "We're getting psychologically up to a point where consumers do start to notice these things," Nustad said.

What we're watching: Several communities, including St. Paul and Golden Valley, could see their prices rise even higher if voters approve local tax hikes on the ballot this November.

Zoom in: Where the money goes

The sales tax increase taking effect Oct. 1 is made up of two separate tax hikes.

🚌 A new 0.75% tax, passed as part of a transportation spending bill, is expected to raise $560 million in the next fiscal year for transit projects such as bus systems and light rail.

• House Transportation Chair Frank Hornstein (DFL-Minneapolis) told Axios that the money is intended to "support the nuts and bolts of the system," like improving service of rapid buses that run on the busier city streets and upgrading transit shelters "so people aren't freezing when they're waiting."

• The Metropolitan Council's share of the funds is also expected to help cover costs related to public safety, cleaning and repair work and adding zero-emission buses.

Of note: There's a one-year prohibition on using the funds for light rail construction.

• "This is really not meant to cover the shortfall [for the Southwest LRT]," Hornstein said.

🏠 A separate 0.25% increase, included in a housing bill, will generate an estimated $150-$200 million over the first two years.

• Metro area cities and counties get about three-quarters of that tax revenue to pay for emergency rental assistance and affordable housing projects.
• The remaining money will be used to fund a new program providing vouchers to subsidize rent for an estimated 5,000 low-income residents.

What to expect: House Housing Committee Chair Michael Howard (DFL-Bloomington) told Axios that the state's voucher program should be up and running next year. Some counties are already making plans for how to spend their share when distributions begin next summer.

• "The virtue of doing this is the predictable, dependable investment that's at a scope that we've never seen before," he said. "That will hopefully pay big dividends in the long term."