The state’s two largest business lobbies are attacking Gov. Mark Dayton as a job-killing Democrat for his proposed budget that would increase state spending by 7 percent over the next two years.
“Before the governor and legislators ask for more from taxpayers, they need to go line by line through the budget, make sure they have cut the waste, and are accountable for every single taxpayer dollar they spend,” David Olson, president of the Minnesota Chamber of Commerce, said last week.
The business lobbies earlier this session beat back Dayton’s plan to lower and expand Minnesota’s sales tax to business services such as law, accounting and consulting. And now the Minnesota Chamber and the Minnesota Business Partnership, which represents the CEOs of the state’s 100 largest companies, have targeted Dayton’s plan to raise a chunk of new money from a “fourth-tier” income tax rate of 9.8 percent. That rate would kick in at taxable income of $150,000 for single filers and $250,000 for married couples.
The chamber and Business Partnership have dubbed their initiative “United for Jobs.”
The current highest rate is 7.85 percent. The Minnesota Department of Revenue says the rate increase would affect only the top 2 percent of Minnesota taxpayers.
Revenue Department studies show that highest-earning Minnesotans, whether from wages or investments, pay a lower overall percentage of their income in local and state taxes than the rest of Minnesotans. Property and sales taxes have risen and the income tax rate actually was lowered at the top end in 2000.
Meanwhile, the state Senate has introduced its budget that calls for a lower tax hike on Minnesota’s top earners and even reduces the corporate tax rate a bit.
Regardless, businesspeople aren’t united on these issues. Case in point: Even “United for Jobs” members are lobbying for increased funding for their favorite causes or to retain their tax breaks.
And not every businessperson opposes a tax hike if Dayton can make the case.
“An increase in the marginal income tax rate would have no affect on our business or whether to expand,” said Harvey Zuckman, 62, executive vice president and an owner of Minneapolis-based FirstTech, who also is president of the Twin Cities Metro Independent Business Alliance.
“Our hiring decisions are based on consumer demand and revenue. I put the question to our MetroIBA members and a number had a similar response.”
Of course business folks support spending when they feel it’s in their interests. The Minnesota Chamber and Business Partnership were fine with new publicly subsidized stadiums for the Minnesota Twins and Vikings; some of their members are advocating for more funding for the University of Minnesota and the Minnesota State College and University System.
Business interests also support millions in new funding for preschool education, which a business-led coalition long has said is the best public investment Minnesotans can make.
The Dayton administration commissioned a study that sheds light on a Minnesota tax code that includes billions annually in tax breaks and credits that Minnesota Revenue says amount to 40 cents on every dollar it would otherwise collect under existing personal tax rates.
“These ‘tax expenditures’ need to be reviewed and the report is sitting on a shelf,” said Mark Haveman, executive director of the research group Minnesota Center for Fiscal Excellence: “Any effort [at tax reform] creates a ‘conga line’ of businesses and organizations who will testify against any tax-expenditure reform if they stand to lose regardless of whether it makes good tax policy.”
And the business lobby is not a monolith. The Minneapolis Regional Chamber and the St. Paul Area Chamber, the state’s largest local chambers, including suburban affiliates and hundreds of businesses, support Dayton’s proposed 0.5 percent increase in the seven-county sales tax for transit investments that would be part of the spending increase. The Minnesota Chamber is not objecting to that tax.
Advocates point to express buses, light-rail lines and suburban transit stations as drivers of hundreds of millions in related private housing and commercial development, as well as the key to attracting federal transportation matching dollars and a cheaper way to cut road congestion than building more freeways.
“Our employers need, want and deserve a 21st-century transit solution to serve their customers and employees,” said St. Paul Area Chamber President Matt Kramer, who once was a key lieutenant to Gov. Tim Pawlenty.
Minneapolis money managers Jim Ulland and Keith Tufte, who boast well-heeled clientele, predict Dayton’s tax hikes will help drive affluent Minnesotans to lower-tax states like Florida and Arizona. Others disagree.
“It would be shortsighted for an individual or company to consider moving out of Minnesota simply because of Gov. Dayton’s proposed tax,’’ said Bob MacDonald, retired CEO of Life USA and Allianz Life North America, who lives much of the year in Florida but maintains legal residency and pays Minnesota income taxes.
“Minnesota has a motivated and highly educated workforce that provides a deep resource for building a company. The small increase in taxes — on those who can most afford to pay them — is an investment in maintaining the high quality of workers. And the return on this investment will far exceed the amount paid.”