In a world complicated by the convoluted and sometimes strained relationship between commerce and the public sector, there's a lot than can get lost in the details of Gov. Tim Walz's $49.5 billion budget.
For many in the business community, their conclusions can be boiled down to a relatively simple sentiment-the outlook isn't good, and it's not just bad for the private sector but the budget could spell trouble for middle-class and working-class Minnesotans for years to come.
"I respect Gov. Walz. I do. I believe him when he says he wants to do right by Minnesotans, boost infrastructure, have a world-class public transportation system, that he cares about businesses. I believe that," said Matt Kilian, president of the Brainerd Lakes Chamber of Commerce. "But, I think these types of things-on the budget side and the gas tax side, in light of the surplus and so on-as a small-business owner and someone who represents small business, it's a hard pill to swallow."
Hours after Walz's visit to Linder Corp. in neighboring Baxter, Kilian stopped by the Dispatch to give his take on the governor's economic vision for the state for four years and beyond. Joining him was Jim Pumarlo, communications director for the Minnesota Chamber of Commerce; Ben Thuringer, managing director of Madden's on Gull Lake resort; and Matt Seymour, owner of several gas stations/convenience stores, such as Pine Square, College Square, Raceway Square and Nitro Square in and around Brainerd.
They contend businesses-and, by virtue of that, mostly middle-class and lower-class Minnesotans-are staring at an $8 billion tax increase over four years. This includes a 23% tax increase on businesses, a $53 million increase on property taxes, a 70% gas tax increase-much of it to fund $3.8 billion in increased spending over the next two years.
This comes, Pumarlo said, with the surplus peaking over $1 billion, all while cash reserves and rainy-day funds sit at all-time highs.
And while these businessmen lambasted Walz's budget as unnecessary, impractical, built on a false pretext and a looming roadblock for commerce in Minnesota, they directed much of their ire at three provisions in particular:
• The first, a series of workforce mandates that include stipulations for employers to provide as much as 24 weeks of paid leave-potentially 12 for family leave, 12 for medical leave-for employees.
• The second, which looks to increase the state's gas stax by 20 cents, or about 70%, over the coming years.
• The third entails hikes for corporate and individual income tax rates-sitting at 9.8% and 9.85% respectively, which places Minnesota at fourth and fifth highest in the nation among states in the USA.
Thuringer characterized the mandates as a crippling bind placed on businesses-fostering a workplace environment ripe for fraud on one hand, he said, while foisting unrealistic expectations on businesses already experiencing a labor shortage. As noted by Thuringer, "family" leave as its loosely interpreted could apply to distant relatives or unrelated friends.
That's to say nothing of the costly bureaucracy it would require to oversee and maintain these programs, Seymour added.
These mandates would place Minnesota among a small club, including California, New York, New Jersey, Road Island, Massachusetts, Washington and Washington D.C, to offer work leave programs of this caliber.
"With record surpluses, now is not the time to hamstring local businesses with more regulations, more taxes and more costs," Pumarlo said. "But, more, give your private sector job creators tools to grow, to innovate, to hire more workers."
In terms of increased commercial and individual taxes, Pumarlo said businesses are experiencing a cumulative overburdening. Social programs are supported by the business community, but to incur such a bevy of taxation on entrepreneurs only hurts the economy and hurts social programs as a result, he added.
Instead, Pumarlo said the Minnesota Chamber suggested raising the tax on automotive part sales and car rentals from 50% to 100% to fund infrastructure improvements to the tune of $330 million a year, while an allocation of around 1% in income tax revenue could also shore up gaps without unduly hurting the business community.
"We are concerned by the size of the governor's budget and some proposals," Pumarlo said. "Our goal at the chamber used to be 'Let's get out of the top 10 highest taxed states in the nation.' Now, it's 'Let's get out of the top five.'"
Continually hiking tax rates on businesses will lead to a situation where these costs are spread out and heaped on consumers, Thuringer said, many of whom hail from the middle and lower strata of society-whether that's decreased benefits, lower wages, higher costs for products and services, loss of training programs, and so on.
At the same time, while tax hikes can alienate larger conglomerates and drive them out of Minnesota, it could be a matter of fiscal life or death for small businesses, said Kilian, speaking as the president of a chamber where 90% of its members employ 20 people or less.
Property taxes were cited as a prime example. Thuringer pointed to the hiked gas tax as a potential hang-up for lower-income Minnesotans if the tax goes into effect as it's currently conceptualized.
"Walz is going after the lower and middle class. A gas tax goes up for folks like us? OK, it chews into our living costs a bit," Thuringer said, indicating the other businessmen in the room. "A gas tax goes into place for someone making, say, $30,000 a year or something like that? That is a big deal. They're going to have trouble getting to work."
According to documents provided by United for Jobs Minnesota, which represents 80 private sector organizations across the state:
• For every 1% increase in corporate tax rate, employment in start-up firms dropped by 3.7%.
• In a recent business survey, 40% of Minnesota businesses are considering leaving or growing their business outside the state-with 35.4% growing elsewhere, while 5% considers leaving the state altogether.
• Of these businesses, 44% cited lower tax rates in other states as a top draw to leave Minnesota.