Lower taxes a high priority for Minnesota business advocates

Photo by Deb Gau Jim Pumarlo, director of communications for the Minnesota Chamber of Commerce, spoke about the impact of high taxes on Minnesota businesses.

MARSHALL — High taxes pose a big challenge for Minnesota’s businesses and economy. But with a projected $329 million budget surplus, and new federal tax reforms in place, Minnesota has a chance to ease the burden, said Jim Pumarlo.

“We kind of look upon this as a once-in-a-generation opportunity,” said Pumarlo, director of communications for the Minnesota Chamber of Commerce.

Pumarlo, together with members of the Marshall Area Chamber of Commerce, spoke Tuesday about the Minnesota Chamber’s priorities for the 2018 state legislative session. Lowering tax burdens and making Minnesota more competitive with neighboring states were high on the Chamber’s list of priorities for advocacy this year.

“Minnesota not only has an opportunity but a need” to lower tax burdens, Pumarlo said.

Minnesota’s top corporate income tax rate, at 9.8 percent, is the third highest in the nation. Individual income tax rates are also high, Pumarlo said. Minnesota’s top individual income tax rate, at 9.85 percent, is the fourth highest in the nation. And the lowest individual rate, 5.35 percent, is higher than many states’ top rates, he said.

Mike Fox, a Marshall Area Chamber member and owner of Ace Home and Hardware in Marshall, said Minnesota taxes like the state business property tax were a negative for his business. Fox estimated his business’ property taxes came out to a cost of around $275 a day.

“Those are our two big burdens, taxes and health care costs,” Fox said.

High taxes not only make it hard to keep businesses in Minnesota, Pumarlo said, but they make it harder for businesses to recruit and retain good employees.

Pumarlo said the Minnesota Chamber is calling for reductions on both corporate and individual state income tax rates, as well as reductions on the state business property tax.

“We aren’t suggesting we want to go from being third or fourth highest (in the nation) to 20th highest,” Pumarlo said, “But maybe we could get out of the top five.”

Another action the Minnesota Chamber is calling for is protection against automatic tax inflators. Fox and Marshall Area Chamber Director Brad Gruhot said last year’s repeal of the automatic inflator for business property taxes was positive. However, Gov. Mark Dayton’s budget proposal is calling for the inflator to be reinstated.

“It’s not good for business,” Gruhot said.

The negative impact on business and industry isn’t the only reason to work to lower Minnesota tax rates this year, Pumarlo said. With new federal tax reforms in place, Minnesota needs to change to conform with the new tax changes. If nothing is done, he said, it means taxpayers will pay an estimated $1.6 billion in additional taxes to the state over the next four years.

By lowering its own tax rates, Pumarlo said, Minnesota also has a chance to make itself more competitive with other states. Gruhot and Fox said that’s especially important in southwest Minnesota, near state borders “Over time, we’ve seen a number of local businesses relocate to South Dakota,” Fox said.