Tax policy creates serious chop for Minnesota businesses

  • Article by: WILLIAM BLAZAR
  • Updated: October 20, 2013 - 2:00 PM

If the sailing is smooth, it’s due to the actions of past legislatures, not the one from 2013.

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Gov. Mark Dayton spoke about upcoming budgets in this 2011 photo.

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For months now, we have been hearing how well Minnesota’s economy is performing. Recent employment statistics and tax collections generally back up these reports. To top it off, Minnesota recently ranked eighth on Forbes’ annual list of “Best States for Business,” up 12 spots from last year.

Each report is predictably followed by a release from Gov. Mark Dayton’s administration and/or the DFL Party leadership, whose members are quick to sing the praises of the 2013 Legislature’s actions and take credit for our current economic success.

It happened again this week. Dayton, in an Oct. 15 visit to New Ulm, underscored that Minnesota continues to be a leader in economic growth and took to task those who complain about the state of the state’s business climate. “If that were true, there wouldn’t be a business left in the state by now.” And in a commentary Oct. 17 (“I’ll take the Minnesota way any day”), Revenue Commissioner Myron Frans wrote: “This year, we worked with the DFL majority in the Legislature to pass a fair and balanced budget. … The results have been good for Minnesota.”

These pronouncements are as sure as the sun rising in the east. What’s puzzling, even amazing, is that few — read: few reporters — ask the obvious question, “What’s driving today’s economic results — actions by the 2013 Legislature or previous legislatures?”

Of course, it’s the latter. You don’t need to be a Nobel laureate in economics to know that economies don’t turn on a dime. Current economic successes — or failures, for that matter — are a direct result of decisions made years ago. We won’t know the actual impact of 2013 legislative decisions for years.

About the most we can say today is to report on the immediate reactions of job creators to actions taken in 2013. The annual Minnesota Business Barometer Survey, sponsored by the Minnesota Chamber of Commerce and Himle Rapp and Company, asked owners those exact questions in July and August.

Though Minnesota employers are more optimistic about the economy than they have been in recent years, they are raising red flags about the state’s business climate. Among the respondents, 71 percent said the 2013 tax bill will have a somewhat or very significant impact on their operations. In addition, 37 percent believe Minnesota has a better business climate compared with other states, but 26 percent say it’s worse. This is the lowest level of confidence in the 10 years of the survey, with the respective figures from 2012 at 55 percent and 10 percent.

Even more worrisome is that business owners have little confidence that current policymakers will do the right thing to keep Minnesota competitive in the global economy. Among business owners and managers, 93 percent say government plays a somewhat or very important role in shaping the development and growth of Minnesota’s economy. However, two-thirds say the governor and Legislature do not understand the challenges of running a business; of those, 78 percent say politicians may understand the basics of running a business but don’t understand how government can get in the way of a business being successful.

These findings are reason for lawmakers to carefully monitor actual business decisions, then make immediate and appropriate policy changes.

We all must realize that understanding and facilitating economic change is a long-term and never-ending process that focuses on improving the overall business climate for the benefit of all sizes and types of businesses and requires a balanced approach. Economic progress also requires a new mind-set among our elected officials — Democrats and Republicans alike. We must get beyond the outmoded strategy that raising taxes to spend more will result in better outcomes. We also must realize that simply cutting spending won’t produce the public service outcomes and infrastructure that are necessary to develop and grow our economy.

Redesigning services to deliver better value is the best strategy for both short-term and long-term success. Though we’ve poked at the edges, we’ve not stayed the course with a serious effort. It’s hard work and requires creativity as well as political backbone. Minnesotans can do their collective part by giving policymakers the license to promote change that capitalizes on today’s evolving economy.

William Blazar is senior vice president of public affairs and business development at the Minnesota Chamber of Commerce.

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