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Chamber: Walz gas tax plan affects everyone

FAIRMONT — Each year, the Minnesota Chamber of Commerce labors during the legislative session to protect business interests, which subsequently impacts all state residents.

“As businesses change and grow, the economy grows, and that benefits all Minnesotans,” said Jim Pumarlo, communications director for the Chamber.

Pumarlo stopped in Fairmont on Tuesday to talk about Gov. Tim Walz’s budget proposal and the challenges it presents to businesses, especially the proposed 20-cent per gallon gas tax hike and the workplace mandate for paid leave.

“The gas tax has gotten most people’s attention,” Pumarlo said. “Right now, Minnesota is actually pretty good as far as the gas tax, but Walz’s proposal would have it go up 20 cents in two years, making Minnesota’s gas tax the fourth-highest in the country.”

While the business sector pays about one-third of the total gas tax in the state, the hike would affect all Minnesotans. The proposed gas tax of 48.6 cents per gallon would make Minnesota’s gas tax about 60 percent higher than neighboring states, something that would hit border communities especially hard.

Although the Minnesota Chamber members oppose the gas tax hike, they support alternative methods of financing the state’s infrastructure projects.

“We are very strong proponents for having strategic and sustained funding for state roads and bridges. That’s critical to Greater Minnesota,” Pum-arlo said.

Current state law earmarks 100 percent of sales tax on rental vehicles and 50 percent of sales tax on auto parts to go to roads and bridges. The Minnesota Chamber is proposing that all of the sales tax on auto parts be designated for a transportation fund.

“That would be $330 million per year,” Pumarlo said. “That’s the equivalent of a 10-cent gas tax increase. It equals just over 1 percent of the general fund. For every dollar you pay in taxes, is it fair to put one penny of that into roads and bridges?”

The workplace mandate for paid leave, another of Gov. Walz’s budget proposals, has spawned tremendous concern in the business community, Pumarlo said.

“There’s a whole bunch of mandates the governor is proposing, but one that is really scary is paid family leave,” he said. “Six other states have it, but what Minnesota is proposing is by far the most expansive of any state.”

If the plan were in place, every employee of every company would be eligible in a 12-month period to take off 12 weeks of paid personal medical leave and 12 weeks of paid family leave. The definition of “family” is broad, he said, far beyond that of a blood relative.

“That’s 24 weeks. That’s 44 percent of a work year, and that’s in addition to vacation, paid time off and holidays,” Pumarlo said.

While federal programs regulate unpaid leave, the state proposal would feature wage replacement of 90 percent for minimum wage earners and 55 percent for higher earners.

“This program would be financed by a new payroll tax, paid by employers and employees, so even if an employee never used the program, they would be paying for it,” Pumarlo said.

The state also would have to create a new bureaucracy to administer the leave program. The state budget office estimates that if the family leave program were implemented in 2021 as proposed, it would cost $450 million the first year. Once it is fully implemented, the cost skyrockets to $900 million annually, with 400 new state workers required to run it.

“Businesses would have to pay the worker on leave, pay for the worker filling in, plus the state’s cost to administer it,” Pumarlo said. “When is enough enough?”

Proponents of the workplace leave mandate claim it will put smaller businesses on a level field with large corporations in being able to offer the employee incentive.

“Minnesota has one of the lowest unemployment rates. I would guarantee that the lion’s share of employers are doing all they can do to offer attractive wage and benefit packages, not only to attract employees but also to retain them,” Pumarlo said.

A Minnesota Department of Revenue tax incentive study showed businesses cannot absorb all the tax increases imposed on them so they are spread out three ways: reduced employee wage and benefit packages, higher prices on products and services for consumers and a lower rate of return for shareholders.

“And it affects the competitiveness of the businesses themselves,” said Ned Koppen, president of the Fairmont Area Chamber of Commerce. “It certainly affects all the communities along the borders.”

Once a business loses a customer, it is difficult to regain that customer.

“It is important that we don’t overburden our businesses,” Koppen said. “Everybody recognizes the need to pay for projects, infrastructure and other programs, but there is a need to temper that taxation to raise more funds to spend on those things, especially when we have as large a surplus and reserves as Minnesota does.”

Koppen expressed gratitude for the work the Minnesota Chamber does in St. Paul on behalf of all of its members, working for legislation that will protect businesses from an unfair tax burden and onerous workplace mandates.

“It is most important to allow businesses to determine what they want to offer,” he said. “They are the best authority on what they need to do to be competitive and attract employees. We should allow all our businesses to determine that themselves.”

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