Will High Taxes Drive Minnesota Small Business Owners Away?

Date: March 13, 2015

2013 tax increase is hurting successful companies.

Minnesota’s high taxes are making some small business owners
consider leaving the state. For NFIB member Robin Kocina, it’s a tough prospect
to consider—but one she just might have to.

“Minnesota businesses are already taxed at higher rates than
those in other states. And small business owners often pay taxes at individual
income-tax rates rather than corporate rates,” says Kocina, who owns Media
Relations, a Burnsville, Minnesota-based marketing agency. “As with most small
business owners, we would rather use the money to create jobs. Government
doesn’t create wealth, but small businesses do.”

Minnesota was ranked 47th in the nation for most competitive
business taxes by the Tax Foundation, a Washington, D.C.-based research group.
In part, that’s because of a $2.1 billion tax increase passed in
2013. It created a new top income tax rate of 9.85 percent and enacted new
business-to-business
sales taxes on services that were quickly repealed due to a public backlash.

“Minnesota made the wrong move,” says Mike Hickey, NFIB Minnesota
state director. “It’s affecting the most successful small businesses—that’s for
sure—who employ a lot of people.”

A bill in the legislature seeks to return to the
previous highest tax rate of 7.85. Meanwhile, another proposal would reduce taxable income
by 10 percent for pass-through entities.

“We’re not sure what’s going to happen,” Hickey says. “We have
a very divided government, and it’s hard to say.”

Meanwhile, Kocina’s dilemma remains. “While we are based in
Minnesota—because we were born and raised here—we have publicists across the
country, from California to Florida,” she says. “But Minnesota’s high tax rates
for small businesses make the idea of moving our business to another state very
appealing.” 

Related Content: Small Business News | Minnesota

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