ST. PAUL, Minn., May 22, 2013—With the legislative session in St. Paul coming to a close, the National Federation of Independent Business (NFIB) today said that its centerpiece, a $2.1 billion tax increase enacted by the Legislature, is the wrong approach and jeopardizes Minnesota’s reputation as a place to do business.
“Many other states have worked aggressively to improve the business climate, and today Minnesota moved in the opposite direction,” said NFIB/Minnesota State Director Mike Hickey. “This revives the stigma that many previous Legislators worked hard to shed that Minnesota is a high-tax, unappealing place for people to grow or expand their businesses.”
The imposition of a new business-to-business sales tax on some services, said Hickey, is also very problematic and will likely have unintended consequences.
“Some businesses are really going to get clobbered due to this new sales tax on some essential business services and the impact may be far worse than expected,” he said.
The bill also significantly raises the top income tax rate to 9.85 percent, giving Minnesota the fourth highest income tax rate in the country.
“This increase really sends a negative signal to the most successful small businesses that employ a lot of people, and it also discourages investors, especially from out of state, who may be affected,” said Hickey.
The income tax hike affects joint filers who have taxable incomes of $250,000 or greater and single filers of $150,000 or greater. Hickey acknowledged that the vast majority of small businesses would not be affected, but those that will provide a lot of jobs in our state.
The bill does have some positive features for small business. There’s a provision offering estate tax relief on small business or farm property that is placed in a trust and an upfront exemption from the sales tax on the purchase of capital equipment. Those are welcomed, said Hickey, but the negative impact of the bill greatly outweighs them.
In a victory for small business, the Senate rejected a massive increase in the minimum wage. Hickey thanked Senate Majority Leader Tom Bakk (Cook) and other senators for rejecting the proposal, which passed the House earlier. That bill would have raised the wage to $9.50 per hour, by far the highest in the nation, and it would have included an escalator provision that would have automatically raised the wage every year.
The Senate took a much more reasonable approach and proposed a modest increase in the wage, retained a lower rate for the smallest of businesses, and the bill stalled in conference committee.
Hickey also thanked Senator Bakk for intervening and twice stopping a street improvement fee bill that Hickey called troubling.
“Without Senator Bakk’s help, this new imposition on commercial property, which could have significantly raised property taxes, would have passed,” he said.
Hickey applauded the passage of a significant unemployment insurance tax reduction that was made possible by the elimination of the deficit in the state’s unemployment insurance trust fund. Eventually, these tax reductions would have occurred automatically, but thanks to legislation authored by Sen. Melisa Franzen (Edina) and Rep. Joe Radinovich (Crosby), this tax cut was accelerated, and it will save employers approximately $347 million in unemployment insurance taxes during 2014-15.
Employers will really appreciate these significant tax reductions, which will be as high as $474 per employee for maximum rate payers. NFIB also joined with others in the Minnesotans for Lawsuit Reform Coalition and successfully blocked two initiatives that would increase lawsuits and liability for various organizations, including not just businesses, but non-profits and government units as well.
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Commemorating its 70th anniversary, the National Federation of Independent Business is the nation’s leading small-business association, with offices in Washington, D.C., and all 50 state capitals. Founded in 1943 as a nonprofit, nonpartisan organization, NFIB gives small- and independent-business owners a voice in shaping the public policy issues that affect their business. NFIB’s powerful network of grassroots activists sends its views directly to state and federal lawmakers through our unique member-only ballot, thus playing a critical role in supporting America’s free enterprise system. NFIB’s mission is to promote and protect the right of our members to own, operate and grow their businesses. More information about NFIB is available at www.NFIB.com/newsroom.
National Federation of Independent Business/Minnesota
380 Jackson Street, Suite 780
St. Paul, MN 55101
651-293-1283
www.nfib.com/minnesota
