Speaker: State spending, taking more

FAIRMONT – If there is one lesson Minnesota business owners learned from the 2013 legislative session, it is that elections matter, says Jennifer Byers of the Minnesota Chamber of Commerce.

Byers was in Fairmont on Tuesday, speaking with local Chamber members and business leaders. For the first time since 1990, when Rudy Perpich was governor, a single party has control at the Capitol. As a result, the state is spending more and taking more in the form of taxes, according to Byers.

The economic forecast for the state in 2014-2015 is an 8.1 percent spending hike, 9.3 percent tax growth, and 3.1 percent gross domestic product increase.

In 2015-2016, the numbers get worse, with a 10.8 percent spending hike, 14.8 percent tax growth, and 2.5 percent GDP increase.

“I would call this historic, massive, very large tax and spending increases,” Byers said.

With the state’s new budget, personal income tax will go up by $1.1 billion, corporate tax by $424 million, business-to-business sales tax by $324 million, and tobacco tax by $408 million.

“I think you’ll find the storm is still coming,” said Jeff DeYoung, chairman of the Minnesota Chamber of Commerce.

The state now has the fourth-highest income tax rate in the state, and that’s one Top 5 list DeYoung would rather not be on.

DeYoung, managing partner at Baker Tilly accounting and advisory firm in Minneapolis, is worried about how the taxes will impact companies considering a move to or from Minnesota.

“No one is saying we don’t want to pay our fair share – we just want to be competitive,” he said.

Looking forward to 2014, Gov. Mark Dayton is promoting the 2014 Legislature as the “Unsession,” and he is asking for suggestions on how to make state government better, faster and smarter.

Priorities the Chamber has for 2014 include:

o Tax relief, to reduce business costs and improve the state’s economic growth and competitiveness.

Their goal is to repeal three sales taxes enacted in 2013 on the following business-to-business services: repair and maintenance of business equipment, purchases of telecommunications equipment, and storage and warehousing services of business-related goods.

o Education and workforce, so employers can have world-class, skilled employees, which often does not mean a four-year degree, Byers said. Often, technical training can offer a young person better job security and more lucrative wages than a four-year degree, she said, especially since about 75 percent of four-year college students will drop out before they earn their degree.

The Chamber wants to see reforms that will help develop better teachers and leaders, strengthen hands-on learning experiences, align education with industry needs, and ensure parents know how their children are doing in school.

o Transportation.

This is one area where Chamber members lack consensus. The statewide business community has not taken a firm stance on transportation, and the same is true locally. Fairmont Area Chamber of Commerce director Bob Wallace said a survey of his members indicated transportation is not high on their list of concerns.

Fairmont City Administrator Mike Humpal predicts that will change, but not until people start to see road conditions decline. He also noted if people knew their tax dollars would be dedicated to local projects, then tax increases might be better received.

o Environmental regulations, which the Chamber believes should promote economic development while protecting natural resources.

o Minimum wage.

The Chamber wants to see the state raise the hourly rate to federal conformity at $7.25 – below Gov. Mark Dayton’s preference of $9 to $9.50 per hour.

Many of those minimum wage earners are youth, said DeYoung, noting that minimum wage was never meant to be a permanent wage.

The intent behind increasing wages is good, DeYoung said, but lawmakers don’t always realize the jobs they could eliminate with a big minimum wage hike. Those jobs performed by youth, working at McDonald’s for an example, could disappear if their positions become too expensive to retain and technology offers solutions to do the job better and cheaper.