The Minnesota Chamber's longtime rallying cry has been, "Get out of the top 10 in tax rates!" Yes, responsible taxation can ensure government services and a high quality of life, but no state wants to be one of the most taxed in the nation; heavy tax burdens choke off entrepreneurship, innovation, wages, and the ability to hire and keep quality employees. Doing business in high-tax states like Minnesota can be quite challenging.
Frustratingly, the Minnesota Chamber may need a new rallying cry after this year's legislative session.
"Now we're saying, 'Get out of the top five'," the Minnesota Chamber of Commerce's Director of Communications Jim Pumarlo said in a mid-session sit-down last week with the News Tribune Editorial Board. "Business taxes are regressive. ... Eventually they get passed on. ... It can affect employee wages and benefits packages, and it can affect consumers and the prices of products. The consumer won't see it all in one sticker shock, but it is all passed along."
The chamber and the state's business community are sounding alarms over DFL Gov. Tim Walz's proposed budget, which includes a 23 percent tax increase on businesses, $8 billion in tax increases over four years, and a $3.8 billion uptick in general-fund spending over two years. Not to be outdone, a House DFL proposal would raise taxes by $12 billion over four years.
And all while the state enjoys a $1 billion surplus and healthy reserves, as Pumarlo pointed out.
Minnesota's corporate tax rate of 9.8 percent is fourth highest in the nation, according to the chamber, which helps explain a recent survey of Minnesota businesses that found nearly half were considering growing - outside the state.
"It's a pretty eye-popping budget," Pumarlo said. "Every Minnesotan will feel it in the pocketbook."
And perhaps at the gas pump. The governor also is proposing a 20-cents-per-gallon increase in the gas tax, a 70 percent jump, which would give Minnesota the fourth-highest gas tax in the nation and make gas in Minnesota 60 percent more expensive, on average, than in our neighboring states. That's particularly concerning in a border city like Duluth.
Instead of raising the gas tax to pay for fixing highways and bridges, the chamber advocates continuing the dedication of all tax revenues from vehicle rentals to transportation needs and increasing from 50 percent to 100 percent sales tax revenues from auto parts for transportation. That would generate an estimated $330 million a year, the equivalent of a 10-cents-per-gallon gas tax increase.
"We need to figure out the state funding for transportation because counties and cities are having to take it on," Duluth Area Chamber of Commerce President and CEO David Ross said to editorial board members, referring specifically to St. Louis County's half-percent transportation sales and the city of Duluth's efforts to enact a similar new tax. "We're going to have to fund it one way or another. The county and the city are having to pick up what the state is not providing."
"It's the cumulative impact of things," Pumarlo said. "If you take the gas tax increase and all these other things, you put them all in, just the cumulative impact on business operations and the cost of doing business in Minnesota gets pretty scary."
"The burden on those of us trying to run a business is getting tougher and tougher," said Bill Bennett, CEO of LHB, an engineering and architectural firm based in Duluth. "It's a competitive market. When you add it all together it just feels like this big weight on our shoulders, dragging business down. Everywhere you turn, it seems, there's something that's hitting us."
So alarms can be sounded. It's on lawmakers and the governor now to hear them, heed them, and respond responsibly.