Minnesota, including Duluth, has an opportunity right now to make significant investments, to attract businesses and industries, and to grow the economy, while also taking care of those who truly need public help.
But we also are at great risk of blowing all the economic and competitive good that could be done with a nearly $20 billion state budget surplus and other stars-aligning opportunities, leaders of the Duluth and Minnesota chambers of commerce said in a recent exclusive interview with the News Tribune Editorial Board.
“If we don’t take some cautionary action (especially at the Legislature) around our already high tax burden, we’re going to miss this,” Duluth Area Chamber of Commerce President Matt Baumgartner said. “Those firms looking to invest here are going to see that their projections just don’t (work out) the way they would in other states or other areas. Even the existing ongoing businesses that we have here, while they probably will keep their foothold here, they’ll look to do their next plant elsewhere.”
Consider the decision of Talon Metals to locate a battery materials processing plant not near where it’s planning to mine those materials in Aitkin County but in North Dakota, where getting permits promises to be less contentious. Or the sudden decision of Huber Engineered Woods of North Carolina to abandon plans for a half-billion plant in Cohasset just days after a Minnesota Court of Appeals decision opened the door to lengthier and more-rigorous environmental reviews.
Minnesota has been throwing up tax and other barriers that cause private-sector job creators to look and go elsewhere; our state is in the top 10 for both individual and corporate taxes, and we are one of only 12 states still imposing an estate tax, as just two examples. Meanwhile, 27 other states in the last two years, by the state chamber’s count, have used their own budget surpluses to reduce corporate and/or income tax rates, making themselves more attractive to the private investment in jobs and prosperity that every state craves.
ADVERTISEMENT
Make no mistake, corporations, developers, and others are sniffing around, ready to invest, but Minnesota isn’t always as welcoming as it needs to be.
“We seem to have this once-in-a-generation opportunity right now in Duluth, in particular, with sites like Lot B (on the bayfront), with the new old Central site that just sold and that we’re trying to get something included for in the tax bill right now, and with the 164 acres of undeveloped property up at the airport that we’ve got something in the tax bill for, too,” Baumgartner said. “We’ve got a very special opportunity up here in Duluth with developers that have never looked at our area, developers from Fargo, developers from the Twin Cities, developers from elsewhere. But that tax burden is something that is very prohibitive.”
And seems poised to get worse. The DFL-led Legislature is considering a higher top tier of income tax at 12.5%, an increase in the capital gains tax, and even a new 40-cent tax on pizza and other retail deliveries. Is there anything DFLers won’t tax? Perhaps not, with a proposed 28% increase in spending — in spite of the $17.6 billion surplus.
In addition, Gov. Tim Walz has proposed a new 0.7% payroll tax on all Minnesota employers and employees to pay for a $40 million state program to guarantee paid time off to Minnesota workers. A new department in the state government will need to be created with hundreds of new employees.
Is it any wonder private investors aren’t looking at Minnesota the way our economy and collective bottom line need them to? Is it any wonder other states are swooping in to snatch away what should be our opportunities?
“Capital goes to places where it’s best deployed,” Minnesota Chamber President Doug Loon said. “Are we going to invest in our future or are we going to continue to just spend? … We could be a complete outlier. Why at a time when we have this size of a budget surplus would anybody be proposing a tax increase? Legit question. Here’s my theory: The governor is going to want to spend here, the House is going to want to spend here, and the Senate is going to want to spend out here, and they’ve got to find a way to accommodate all that. … That’s why they’re talking about tax increases, because nobody wants to talk about scaling back and doing less. … Tax increases, again, put us at a competitive disadvantage.”
That’s something Duluth and the state, with opportunities before us, cannot afford.
The Trust Project
