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Our View: Seize chance to right-size Minnesota taxes; Opportunity now is rare, chamber says

When it comes to how much we pay in taxes, no one wants to be at the top of the list. Yet there's Minnesota with its corporate income tax the third highest in the nation and with its top-tier personal income tax rate a disappointingly lofty No. 3.

Moving Minnesota to more reasonable rankings would benefit workers, employers, and the state's economy while also helping our state be more competitive both nationally and globally. A bit of tax relief could even help Minnesota chip away at its unflattering reputation, deserved or not, as a pricey and difficult place to do business.

Not at all surprisingly, moving Minnesota down those most-taxed lists is a top goal in St. Paul this legislative session for the 2,300-member Minnesota Chamber of Commerce. With a state budget surplus for a fifth straight year, the recent federal tax overhaul, and the need to bring our state into compliance with the federal tax system, now is a prime opportunity for lawmakers to make a move, the chamber argues.

It could even be seen as a "once-in-a-generation opportunity," the state chamber's Jim Pumarlo said in a meeting this month with News Tribune Editorial Board members.

"The last significant federal tax reform was in 1986 and that was under President (Ronald) Reagan, a Republican. In 1987, we had a Democrat governor in Rudy Perpich and we had Democrats in control of both the House and Senate (in Minnesota)," Pumarlo, the chamber's director of communications, said. "In 1987, Minnesota ranked pretty high in personal and corporate income tax rates. Through Perpich's leadership, though, the state reduced our rates on both corporate and personal income taxes. Our concern is that, since then, we've kind of stayed stagnant while other states have become more competitive."

A generation later, Minnesota can again reduce its personal-income and corporate tax rates by tapping the state's budget surplus and by taking strategic legislative measures. Disappointing to Pumarlo and others, however, Gov. Mark Dayton has proposed using as much as two-thirds of the surplus to increase spending.

Private spending instead could be encouraged with lowered taxes, Pumarlo and Duluth business leaders told the editorial board.

"Being a community bank, we'd try to pass it through as much as we can; in our world, that'd be in the form of lower interest rates. It'd be good for the customers," said David M. Gaddie, president and CEO of Republic Bank in Duluth. "Our hope and our expectation is we can put the money to use, whether it's in capital reinvestment or better employee salaries and benefits."

"Windfalls from corporate tax changes come back to benefit downtowns; they come to main street," said Lisa Bodine of the marketing agency Giant Voices, which is located on Superior Street in downtown Duluth.

"If we don't have the resources to reinvest in ourselves, we can't reinvest in our community," Alakef Coffee Roasters owner Alyza Bohbot said. "What's the point of paying into (tax) systems if we're going bankrupt as as company. ... With some tax relief, imagine what Minnesota could accomplish. Imagine what our businesses could accomplish. ... The backbone of the Minnesota economy is small business."

Lowering corporate tax rates encourages small businesses to invest in their workers and in their communities just as lowering personal income taxes bolsters Minnesota's economy through the subsequent increase in personal spending.

"So this, right now, is an opportunity for us on the tax front to move forward," Pumarlo said. "Our whole point is to start on a path. We're not suggesting trying to go immediately from fourth to 25th; we aren't going to solve this overnight. But very common-sense tax policy can take us a step at a time to a more reasonable place and, we think, put us in a more competitive position."