MANKATO — The fundamental budget message to Minnesota lawmakers from the Minnesota Chamber of Commerce has been consistent through the years: For a bunch of reasons, higher taxes are bad for business and bad for the state.
For the last decade, the chamber had staunch no-new-tax allies either in the governor’s office during Tim Pawlenty’s two terms or in the House and Senate when Republicans held the majority the past two years.
Now Democrats are running the state Capitol with DFL Gov. Mark Dayton midway through his four-year term and Democrats taking control of the House and Senate in the Nov. 6 election. Did the chamber considering altering it’s approach? Maybe switch to something like: We know you’re going to raise some taxes, but please don’t raise these particular taxes because it would be bad for business and bad for the state.
That’s not the plan. At least, not yet, said Jim Pumarlo, communications director for the statewide organization of business owners.
“We’re not ready to kind of accede and say, ‘OK, we’re going to have all this new revenue,’” said Pumarlo during a visit Wednesday to Mankato.
So, the chamber’s position remains that the state’s budget shortfall — $1.1 billion for the next two-year budget cycle — should be dealt with through spending cuts. Tax reform is a good idea, but it should be done to improve how and where taxes are collected — not to increase revenue.
“What we hear from our members, it’s still a fragile economy out there and we don’t think it’s the right time to raise taxes on businesses or families,” Pumarlo said.
Dayton’s budget would boost income taxes on the wealthiest 2 percent of Minnesotans, raise cigarette taxes nearly $1 a pack, expand the sales tax to many services and close certain corporate tax loopholes/incentives.
Part of the revenue would be used, along with less than $200 million in spending reductions, to eliminate the budget shortfall. Another chunk of the revenue would provide property tax relief, including $500 property tax rebates to most homeowners.
The sales tax rate would be reduced from 6.8 percent to 5.5 percent, the state property tax on businesses would be frozen, and the corporate income tax rate would be cut 14 percent.
That still leaves extra revenue that would go to education, city and county aid, grants to college students and other Dayton spending priorities.
“I’m not out to raise anybody’s taxes,” Dayton said in introducing his budget last week. “I’m out to raise enough revenue to do what’s right for Minnesota.”
Both Dayton and the bulk of legislative Democrats were elected on a promise to deal with budget shortfalls by combining increased revenue and reduced spending — the so-called balanced approach. Pumarlo said the chamber will be pushing to get the balance more toward the spending side.
“Look at what you’re doing and — especially in today’s economy — what you can do more efficiently,” he said.
On the tax side, the chamber agrees with Dayton that sales taxes should be collected on Internet purchases so that Main Street retailers aren’t at a competitive disadvantage against online sellers. Outside of that — including Dayton’s property tax rebates — there’s not much the chamber and the governor agree on when it comes to tax increases.
Even knowing that tax hikes of some sort are likely, the chamber isn’t ready to start lobbying on behalf of the least-objectionable options. That may come later in the session, Pumarlo said, but not now.
“Our priorities remain the same,” he said. “But obviously your strategies can change. This year we’re going to be playing a little more defense on some issues.”