WASHINGTON – Minnesota's businesses are awaiting the full details of President Trump's tax plan, but so far they like what they see.
At the core of the proposal administration officials outlined Wednesday is a plan to cut the corporate income tax rate from 35 to 15 percent. Executives said that could spur the capital investments that the president is counting on to offset the huge loss of federal revenue that will result from the tax plan.
"This will have a positive effect on our [and all] business and allow us to invest more capital back into growing our company," Andrew Clarke, CFO of Eden Prairie-based C.H. Robinson, said in an e-mail. "Investing more capital means hiring more people and purchasing more services — investments that help grow the economy."
Companies large and small would benefit in other ways from the plan. Providing a one-time holiday for companies to bring foreign cash back to the United States, as Trump proposes, could be a useful opportunity for companies such as 3M that make a lot of money overseas.
Target and Best Buy, meanwhile, would benefit from the omission of a so-called "border adjustment" tax that would effectively increase U.S. businesses' cost for imported products or parts. While that tax has been floated as a way to compensate for big income tax cuts, there was no mention of it Wednesday. The border tax idea is meant to encourage businesses to use American-made products, but has been opposed by major retailers.
Charlie Weaver, executive director of the Minnesota Business Partnership, a group of more than 120 top executives, believes his members will be "generally happy" with Trump's plan. He said it puts American businesses on par with the rest of the world.
"All we've ever asked is to be competitive on a level playing field," Weaver said.
Minnesota Chamber of Commerce vice president Bill Blazar said including small businesses in the tax cuts was significant. "The fact that this not only addresses corporations but pass-through companies is a big deal in a place like Minnesota," he said. "The majority of businesses in the state are S corporations, limited liability corporations and sole proprietorships."
If Congress approves the plan, those companies would be able to reinvest profits and grow in ways they cannot under the current system, Blazar said.
But he and Weaver acknowledged that freeing up business capital through tax cuts will challenge policymakers with the prospect of a fast-growing federal deficit.
By several estimates, corporate tax payments would shrink by more than $2 trillion in a decade under the plan that Trump economic adviser Gary Cohn and Treasury Secretary Steven Mnuchin outlined for reporters.
Extending the 15 percent rate to small businesses as Trump envisions would reduce revenue another $900 billion over 10 years, the independent Urban-Brookings Tax Policy Center concluded. At the same time, individual tax payments would dip $1.7 trillion thanks to Trump's cuts.
Economist Marty Sullivan of the publication Tax Analysts noted that the border adjustment on imports would raise enough tax revenue to significantly offset the corporate tax cuts Trump has proposed. But Sullivan said the president's silence about the proposal likely means "nails in the coffin" for it.
Weaver called the price increases that might become necessary with the border adjustment tax "punishing to consumers and a drain on companies like Polaris, Best Buy and Target."
A Target spokesperson said the company was "still reviewing the details of the White House's tax proposal," but was "encouraged that the border adjustment tax is not a part of it."
Another big issue for some Minnesota companies is getting easier access to profits they've earned around the world.
Medtronic, 3M and some other major Minnesota companies collectively have tens of billions of dollars in foreign profits that have been left overseas, untouched by U.S. taxes, because the cost of bringing that cash home was deemed too high. The Trump plan proposes a one-time opportunity to book and use those profits in the United States at what Mnuchin said will be a very "competitive" rate.
Mnuchin said the purpose was to "bring back trillions of dollars to create jobs." Trump had earlier talked about a 10 percent tax to bring home the $2.7 trillion U.S. companies hold in tax-deferred foreign profits.
While the repatriation of that money would add to the economy and the U.S. Treasury, it would mean billions less for the government than if the cash were brought back under the current tax code.
Medtronic held $29 billion in tax-deferred foreign profits in 2016, according to Securities and Exchange Commission filings; 3M held $14 billion and General Mills held $2 billion. None of the companies would comment on whether the president's tax plan might entice them to bring that money back to the United States to spend.
Weaver thinks it's likely that the return of overseas cash would provide some Minnesota companies with the ability to make new investments that could create jobs.
3M said in a statement the company was still analyzing the proposals outlined Wednesday, adding "we are appreciative of the president's support for comprehensive tax reform and his commitment to increasing the competitiveness of U.S. manufacturers and businesses."
A shortage of specifics in Wednesday's proposal and the prospect of a bruising debate in Congress left Tina Rexing, owner of Minneapolis-based T-Rex Cookie and Coffee Café, unsure how Trump's proposals would affect her business. Rexing said she was hopeful that tax cuts might improve the odds that she'll find investors to allow her to grow through franchising.
"I don't think I'm big enough to be concerned with the tax cuts that Donald Trump is putting out," she said.
Jackie Renzetti, a University of Minnesota student on assignment for the Star Tribune, contributed to this story.
Jim Spencer • 202-662-7432
