Business group sees opportunity
FAIRMONT — The Minnesota Chamber of Commerce will focus its state lobbying efforts on four fronts this year.
Transportation, workplace regulations and affordability, which encompasses workforce housing and childcare, will be hot topics at the Legislature, but the spotlight will highlight tax competitiveness.
“We really think, in combination with the federal tax reform which was passed in December and with the state’s surplus, that Minnesota not only has an opportunity but a need to right-size our tax system and give some money back to the individuals and businesses that contributed to the surplus. Everybody will benefit, from employers to employees,” said Jim Pumarlo, communications director for the Minnesota Chamber.
Pumarlo was in Fairmont on Tuesday and met with Margaret Dillard, president of the Fairmont Area Chamber of Commerce, and local Chamber board members Deb Barnes, administrator at Lakeview Methodist Health Care Center, and Dave Cone, CEO of Kahler Automation.
Minnesota has four personal income tax brackets, with the top rate of 9.85 percent registering as fourth-highest in the nation.
“Our lowest personal income tax rate is 5.35 percent, and that is still higher than the top rate in 23 other states,” Pumarlo said.
The state’s top corporate income tax rate of 9.8 percent is the third-highest in the country, but Gov. Mark Dayton is pushing for a 20 percent increase on corporate taxpayers, as well as unwinding tax relief measures passed last year, Pumarlo said. He cautioned against thinking only Fortune 500 companies paid the corporate tax rate. Minnesota has 17 Fortune 500 companies, but more than three-fourths of the state’s 35,000 small businesses, which also pay the rate, have gross receipts of less than $1 million annually.
“We’re working hard with legislative leadership,” he said. “We think there’s interest in moving on a path for making Minnesota more competitive.”
The Minnesota Chamber is developing a specific proposal, but even a half a percent decrease would be a start. When coupled with the federal tax cuts, companies would have some financial flexibility to reinvest by expanding or by boosting employee wages and benefits, Pumarlo said.
“We had a good legislative session last year, but you don’t do things in one fell swoop. You do things in incremental progression so we will continue to work on how to make Minnesota businesses more competitive,” he said. “This is almost a once-in-a-generation opportunity — and need — to start on the path to making Minnesota companies more competitive with their peers.”
Pumarlo noted that the last major corporate tax reform occurred in 1987 under Gov. Rudy Perpich, a Democrat, following federal reform spearheaded by President Ronald Reagan, a Republican.
“We’re hoping this year can be the same kind of bipartisan work,” he said.
As head of Kahler Automation, Cone said it can be difficult to attract employees to a rural area without the amenities and shopping of larger cities plus high income taxes.
“We struggle with that, and there are other businesses here dealing with the same thing,” he said.
The company’s two largest competitors in Indiana and Iowa don’t have that same burden.
“Each dollar we sell results in a higher rate of tax, and that does limit us in trying to reinvest in our business,” Cone said. “It’s very challenging.”
He told about one of Kahler’s customers that moved its entire operation from Minneapolis to a Wisconsin site 45 miles away.
“It was all due to the corporate tax rate,” he said.
“Minnesota has a strong quality of life, but how much is enough?” Pumarlo said. “You reach that tipping point. Every year, there is a new regulation or a higher cost of doing business.”
“We all like our quality of life,” said Cone, citing the safety, education system and recreation in the area. “But at the end of the day, it would sure be nice to have a balance between the quality of life and taxes.”
Barnes said that 65,000 people in the state turn 65 every year.
“In the last 10 years, the 55 to 64 age group grew from 18,000 to 30,000 in this region,” she said, expressing concern on how to replenish the workforce when younger people leave for states with lower taxes, following the companies that are located there.
Barnes asked Pumarlo about the availability of a letter template to send to legislators.
“If they had a letter from every Chamber member, that would speak volumes,” she said.
Working through the Minnesota Chamber of Commerce is a huge advantage for local chambers such as Fairmont, Dillard said.
“It helps to be able to have a voice larger than just us. We don’t have the dollars that you (Minnesota Chamber) do to get legislators’ attention,” she said.
Pumarlo encouraged business owners and residents to support a more competitive corporate tax rate as well as lower individual tax rates.
“We need to start on the path of reducing the rates,” he said. “Contact your legislators or the Chamber. There’s no better avenue than working through Margaret and your local Chamber.”