Use federal tax reform to rightsize tax system
By Doug Loon
Minnesota’s tax system is center stage at the Legislature following passage of the significant federal tax reform. We join our local chamber partners in encouraging Governor Mark Dayton and the Legislature to seize the real opportunity – and real need – to rightsize Minnesota’s tax system for the long-term benefit of employers and employees.
“It’s disappointing that Dayton’s supplemental budget not only raises overall taxes, but he also proposes to unwind the specific business tax relief measures that he personally negotiated and signed into law last year. In particular, he proposes to bring back the statewide business property tax inflator. This is yet another debilitating tax increase on main street businesses across Minnesota.
The Governor proposes to use two-thirds of the projected $329 surplus for the current biennium on new spending. The Legislature has already set the two-year budget, and spending has increased 11.4%. Minnesota is enjoying a surplus for the fifth consecutive year. It’s time to pass that prosperity on to Minnesotans by enacting pro-growth tax reforms focused on reducing all tax rates.
Returning a significant portion of the state revenue gains from federal tax reform, and the resulting state surplus, to the private sector will help grow jobs and strengthen our economy. Minnesota cannot afford to stand still and become less competitive. Many other states, including Iowa, already are proposing to reduce their personal income tax and corporate tax rates. It’s time to get out of the top five in so many tax rankings.
Our top individual income tax rate is fourth highest in the nation. More than 90 percent of all Minnesota business owners pay their taxes through their personal income returns. Every dollar that goes to taxes is one less dollar available to invest in employees and operations. Moreover, our high rates exacerbate companies’ challenges to recruit and retain talent.
Our top corporate tax rate is third highest in the nation. High corporate rates harm entrepreneurship and investment. The tax is ultimately paid by individuals through lower employee wages and benefits, and higher prices for goods and services.
There’s no better economic engine than putting the money in the hands of the private sector. Witness the headlines following passage of federal tax reform – companies passing along the benefits of tax savings to their employees, shareholders and host communities.
The governor and Legislature truly face a once-in-a-generation opportunity to rightsize our tax system. Minnesota enjoys another state surplus – the fifth in five years. Spending is up more than 11 percent, and the state’s rainy day fund is approaching $2 billion. It’s time to pass that prosperity on to employers and employees alike. Together, we can grow our economy for the long-term benefit of all Minnesotans.
Doug Loon is president of the Minnesota Chamber of Commerce – www.mnchamber.com.