The Free Press, Mankato, MN

June 26, 2013

Chamber recaps '13 Legislature

Message: Despite taxes, an OK year for business

By Dan Linehan
dlinehan@mankatofreepress.com

---- — MANKATO — Yes, the Minnesota Legislature raised taxes on businesses this session. And yes, many of those business owners are worried this will make them less competitive.

But a Wednesday breakfast organized by Greater Mankato Growth to summarize the session didn't focus on those taxes. Instead, a St. Paul lobbyist and three local legislators told the crowd what businesses could expect to get for their money.

Michael Miller, a senior lobbyist with Flaherty and Hood, said "Despite the tax increases, this was a fairly decent session for business."

One of those tax increases, a new 9.85 percent income tax tier — levied on unmarried individuals making $150,000 per year and on couples filing jointly at $250,000 — will be charged mostly on Twin Cities residents because most of the state's wealthy live there, he said. And some of that money will be coming back to Mankato businesses in the form of $200 million in property tax relief to cities, counties and schools.

Businesses also saw the creation of two new programs aimed to help them grow, but the results may turn out to be mixed for Greater Minnesota, said Miller, who lobbies for the Coalition of Greater Minnesota Cities.

One of them, the Greater Minnesota Internship Tax Credit, would reward companies for hiring college interns by paying part of their salary, up to $2,000 per person. The state allocated $2 million a year toward the program.

The other, called the Job Creation Fund, is Gov. Mark Dayton's successor to JOBZ. Miller called it an improvement, but worries that its high threshold for job creation will exclude Greater Minnesota, which has fewer large businesses. Few Mankato businesses, for example, will be able to take advantage of the bill's sales tax exemption for equipment because it requires a company to spend $25 million and create 75 jobs. Other incentives require fewer jobs to be created.

Miller said the governor has agreed to help change the program if, after the first year, Greater Minnesota isn't seeing much benefit.

In addition, the Legislature approved a sales tax exemption on construction materials for Greater Minnesotans business expansions. There was also a $346.5 million reduction in unemployment insurance statewide, he said.

An effort to create a job training bill similar to North Dakota's didn't pass.

When Jonathan Zierdt, president and CEO of Greater Mankato Growth, asked the legislators for their key highlights and disappointments he heard the same answer a few different ways.

Rep. Clark Johnson, Rep. Kathy Brynaert and Sen. Kathy Sheran each said their biggest disappointment was the lack of a bonding bill.

"It's a bit of a tragedy. It's really wrong," Johnson, DFL-North Mankato, said, referring to the failure of a measure to renovate and expand the Minnesota Security Hospital in St. Peter, home for the mentally ill and dangerous.

Businessman Fred Lutz asked about the prospects for a bonding bill next year. He was told that the presence of a bill is a near certainty, but Republicans may not support a bill large enough to accommodate civic center expansions like Mankato's.

Brynaert, DFL-Mankato, and Johnson agreed that their biggest success was the funding of education, while Sheran, DFL-Mankato, added that the state budget was stabilized.

Zierdt didn't spare the legislators the tough questions. He asked what they thought about the proposed minimum wage increase as well as the business-to-business taxes that were passed, both of which were generally opposed by business interests.

"Minimum wage will be back on the floor," Brynaert said. If a business pays only minimum wage, the state has to pick up the slack with welfare programs, she said.

Zierdt asked specifically about the controversial tax on rented space used for warehousing. As Democrats promised immediately after the session, Johnson said the party would be taking another look at the tax.

But Sheran acknowledged she'll continue to be a proponent of lowering the sales tax while widening its application. Dayton's plan earlier in the session to tax business services like accounting met with fierce opposition from business.

Zierdt asked the legislators to look ahead to next year, when there won't be a two-year budget to craft. Johnson said he likes the idea of an "unsession," where legislators talk about removing old laws instead of making new ones. He asked business owners to send him ideas about old laws that no longer have merit.

When asked whether his members agree with the argument that this was a good session for business, Zierdt said he wasn't sure because he hadn't surveyed them. He said several people have brought up the warehousing tax with him, prompting his question to lawmakers.