Minnesota Chamber of Commerce criticizes Walz’s proposed budget

WORTHINGTON - Minnesota Chamber of Commerce Director of Communications Jim Pumlaro visited Worthington Tuesday to outline the Chamber’s legislative priorities this session.

The Minnesota Chamber of Commerce comprises about 2,300 businesses statewide, 78% of which have 100 or fewer employees.

Pumarlo explained that the cost of doing business in Minnesota and taxes on business are perennial challenges addressed by the Chamber.

“As businesses change and grow, the Minnesota economy grows, and that’s good for all Minnesotans,” he said.

He laid out a few criticisms the Minnesota Chamber has of Gov. Tim Walz’s financial plan.

Business taxes Walz has proposed an increase of $2 billion in business taxes over the next two years. That amount is equal to the rainy day fund Walz has planned.

Pumarlo explained that in 2017, federal tax code was significantly reformed to reduce business taxes, but Minnesota’s state tax code is still out of conformity with the new rules. He said Walz plans to use the additional revenue to increase spending, rather than putting it back in the pockets of Minnesota’s businesses.

He cited a Minnesota Department of Revenue report that claims “business taxes are regressive,” meaning they are generally absorbed by three parties:

1. Employees, in the form of lowered wages and benefits
2. Customers, by way of increased costs of products and services
3. Shareholders, through lower returns

He said the position of the Chamber is that the state should give businesses greater financial leeway to innovate, which would generate more income for the state in the long run.
FMLA expansion Pumarlo said the Chamber is also concerned about the  proposed amendment to the Family and Medical Leave Act (FMLA) which would allow up to 24 weeks of leave time to care for a new child or a sick family member. Currently, only 12 weeks are allowed.

The proposed amendment also greatly expands the definition of a family member, something Pumarlo worries could be a loophole for employees.

As FMLA is currently written, it only applies to schools, public organizations and private companies with 50 or more employees. However, Pumarlo explained, a brand new state paid leave program separate from the federal FMLA, which provides unpaid leave, would apply to employers of all sizes from one employee and up. Employers with fewer than 50 employees are not exempt from the proposed state paid leave program.

Pumarlo said the Chamber proposes that the state simply allow competition to run its course.

“Let employers and employees work together to develop the packages that best suit the needs of their organizations,” he said. Employers want to offer benefits that are attractive to potential employees, and they can figure out how to do that themselves, he added.

Gas tax A third major objection the Chamber has concerns Walz’s proposed gas tax, Pumarlo said.

The Chamber “strongly believes in sustained and strategic funding of roads and bridges,” he explained. But the Chamber believes there is another way to accomplish this other than raising the gas tax by 20 cents - a move that would represent a 70 percent increase and put Minnesota fourth highest in the nation for gas tax.

Pumarlo explained that roads and bridges are not funded through the state’s general fund, but by user fees like gas tax and vehicle registration fees. These collections are trending down, putting the state in a tough position.

Recently, Minnesota passed a law that changed the funding method slightly. In accordance with 33 other states, Minnesota began funding roads and bridges using some of the general fund. Specifically, 100% of sales tax on rental vehicles and 50% of sales tax on auto parts goes toward roads and bridges.

Not only does Walz want to raise the gas tax by 20 cents, but he also proposes to eliminate the use of rental vehicle and auto parts sales tax to fund roads and bridges.

Instead, the Minnesota Chamber suggests that the state retain the 100% of sales tax on rental vehicles toward roads and bridges, and raise the amount of sales tax on auto parts to 100% as well.

If the state funded roads and bridges this way, those two taxes alone would generate $330 million annually, the same as a 10-cent gas tax. It would also only account for 1% of the general fund, so other projects would not take a major hit.

Locally Darlene Macklin, Executive Director of the Worthington Area Chamber of Commerce, and Ken and Zuby Jansen, owners of Crafty Corner Quilt & Sewing Shoppe, participated in the conversation and weighed in about how the state Chamber’s priorities could affect businesses locally.

Zuby Jansen pointed out that the concerns outlined by Pumarlo are reasons some people just go over the state line to do business.

Macklin agreed.

“It really affects our community, especially in rural Minnesota,” she said.

Zuby Jansen continued, “The employer cannot afford all this stuff.”

Ken Jansen pointed out that if the Jansens wanted to sell their business and a younger couple bought it, the new owners may not be able to afford to buy health insurance.

“Our small businesses are already struggling to compete,” Macklin said.

Especially in a world seemingly run by Amazon - which Ken Jansen described as “a small business killer” - all agreed that the state’s proposed changes might mean the death of some community businesses.