A loyal executive is also frustrated with state

As sales plunged in early 2009 and his company scrambled to cut production and hours, Red Wing Shoe Co. President Dave Murphy studied an internal analysis of operating costs.
"From a purely economic point of view, you could argue that we shouldn't make shoes in Minnesota, but at our plants in Kentucky and Missouri," Murphy said.
Chairman Bill Sweasy Jr., whose family has owned the iconic Minnesota manufacturer for nearly a century, nixed that notion in a hurry.
Since then, the company, one of the last of the domestic shoe-and-boot manufacturers, has increased sales by 20 percent to more than $500 million, and achieved solid profitability for the second year in a row. And it has added workers for two years in Red Wing, where it employs 1,200 at factory wages that can approach $28 an hour, including benefits.
Recovery aside, Murphy, 59, a veteran executive who once worked for General Mills, represents a Minnesota business community that has concerns about the state's business climate.
A recent survey of 350 employers, conducted for the Minnesota Chamber of Commerce, found that profitability this year was worse for 26 percent of respondents while better for only 19 percent. At the same time, optimism about the economy is waning. (The survey was conducted in August, a period that coincided with plunging stock markets and worries of another recession.)
And strong majorities of Minnesota businesses feel threatened by high taxes and myriad regulations.
"State corporate tax is not the biggest issue in the business," Murphy said. "It's inspiring people, good strategy and competing against lower-priced goods from foreign shores. But taxes and regulation are significant here."
For example, the U.S. Department of Homeland Security ordered Red Wing Shoe to keep the doors closed at its main plant for reasons that Murphy still doesn't understand. Employees generally were free to wander in and out before that, and doors were open during the good-weather months.
The company then spent $750,000 on an air-conditioning system to keep the plant cool now that the doors had to remain shut. That improvement helped push up its local property tax bill.
"We love being based in Minnesota," said Murphy, who credits a skilled workforce with much of the company's success. "However, we do feel we're swimming against the current to some degree."
More than two-thirds of the business owners polled were upset with the failure of the Legislature and Gov. Mark Dayton to find more common ground during a 2011 session that ended with to a several-week shutdown of state government.
"They need to stop kicking the can down the road and make the tough decisions," Murphy said. "I wasn't happy with the outcome of the budget deal because it was smoke and mirrors, borrowing against the future, and not paying the schools what was owed this year and all the rest. I don't know why some sense of moderation and compromise is so difficult. That's not weakness. It's reasonable."
The politicians might consider dusting off the business-led 21st Century Tax Commission report of 2009. It recommended a phaseout of Minnesota's nominal 9.8 percent corporate income tax rate, which is higher than most and riddled with enough loopholes that it collects less than 4 percent the state's budget revenue. Yet it's a huge sore point for business and a rallying cry for other states trying to lure Minnesota business.
The commission also suggested broadening the sales tax to clothing and services to reflect today's economy. That would mean broader sales tax but a lower sales tax rate.
Gov. Mark Dayton has ordered a streamlining of duplicative environmental regulations across several agencies and other measures.
"I would say I am very comfortable with a balanced approach to solving our state budget problems," said Murphy in an interview. "Taxes and spending. I really think tax reform is necessary. They're too complicated [in Minnesota] and they are not fair. Not just tax the rich. But I'm willing for my ox to get gored if that what it takes for a better system."
Todd Rapp, president of Himle Horner, the public affairs firm that sponsors the annual survey with the chamber, said the survey results are clear.
"They want a clear tax reform plan, stability and predictability in health care and energy costs and confidence that the education system will turn out good graduates, even if it costs a little more .… If the Legislature did those three things, the average Minnesota business owner would say 'Wow!'"
That's all a tall order. But hope springs eternal.
Besides the chance to vent on a survey, 85 percent of Minnesota employers also said they have confidence in Minnesota's economic future over the next decade. And that's up from last year.
Neal St. Anthony • 612-673-7144 •
nstanthony@startribune.com