It’s spring, and with less than a month remaining in the 2019 legislative session, warmer weather has coincided with overheated rhetoric, much of it aimed at Minnesota employers.
As a former legislator, I understand that politics is a rough-and-tumble business not for the faint of heart. Passionate rhetoric comes with the territory. But I also understand that sometimes political attacks are launched to distract the public from what is the true intent of the accuser. That is what is going on here.
In recent weeks, some DFL legislators have vilified unnamed Minnesota companies, accusing them of exploiting tax loopholes and not paying their fair share of taxes. These broad-brush attacks may be politically expedient, but they offer a skewed and cynical perspective on one of our state’s greatest assets: the extraordinary economic engine that is powered by the abundance of large headquartered companies that call Minnesota home.
Minnesota companies and their employees are central to our state’s economic success. They create well-paying jobs, spur economic development and attract investment to Minnesota. Each year, they pay more than $15 billion in wages and benefits in the state and contribute more than $13 billion in state and local taxes.
Our business community also has a long tradition of philanthropy and community leadership, supporting our state’s charities and cultural institutions, from the Dorothy Day Center to the Guthrie Theater. In fact, Minnesota companies are responsible for nearly half of all charitable grants sourced in the state.
So, given the benefits that large Minnesota companies provide to enhance the quality of life for every Minnesotan, what is fueling the drumbeat of attacks on these homegrown employers?
The attacks seem to be an effort to deflect from a substantive debate about the controversial policies being proposed by DFLers at the Capitol — proposals that would increase costs for Minnesota families and impose costly new taxes and mandates on Minnesota’s homegrown job creators, including small businesses.
The magnitude of tax hikes being considered is breathtaking. Under the House DFL plan, Minnesotans would pay higher gasoline taxes and payroll taxes. Homegrown businesses, including small pass-through companies, would pay higher income taxes, property taxes and payroll taxes. These business tax increases are also regressive, with the costs ultimately being borne by consumers, employees and investors.
Remarkably, these tax hikes are being pushed at a time when the state has a billion-dollar surplus and historically high budget reserves. Some lawmakers have argued that since employers received a tax break at the federal level, they can afford to pay higher taxes at the state level. This view is misguided.
There is a broad consensus among economists as well as bipartisan agreement that, prior to the recent federal tax reform, the nation’s high corporate tax rate was putting American businesses at a competitive disadvantage compared to lower-taxed competitors elsewhere. Federal tax reform merely attempted to level the playing field for American businesses. And many Minnesota companies put that tax relief to good use.
St. Paul-based H.B. Fuller, for example, has used the federal tax cut to reimburse employees for the individual portion of their health insurance premiums. U.S. Bancorp gave cash bonuses to nearly 60,000 employees, increased its base wage for hourly workers to $15 an hour and contributed $150 million to charity. And Minneapolis-based biotech firm Bio-Techne gave bonuses to its 1,600-plus employees.
Despite the positive effects of federal tax reform, Minnesota’s tax code presents its own set of challenges. Minnesota has the fifth -highest personal income tax rate and the fourth-highest corporate income tax rate, and the state ranks 43rd out of 50 in the nonpartisan Tax Foundation’s State Business Tax Climate Index. All of this makes it more challenging for employers to create good, high-paying jobs here. Adding billions in new taxes would exacerbate the problem.
I know that the governor and lawmakers in both parties want to grow the economy in Minnesota. The way to provide opportunities for all Minnesotans and reduce economic disparities is not to vilify large employers who provide good jobs for thousands of Minnesotans, but rather to focus on how to attract and retain them.
Charlie Weaver is executive director of the Minnesota Business Partnershp.