Do tax increases kill jobs? Minn. soon to find out
MINNEAPOLIS (AP) — Dik Bolger is a lifelong Minnesota Democrat, a gray-bearded baby boomer with a braid down his back whose Minneapolis printing company's plant displays work by local artists and sculptors. He backed Mark Dayton for governor, but his take on the Democratic chief executive's plan for new business taxes could be the voice-over for a Republican campaign commercial.
"We're screwed," Bolger said, if the tax goes through. His 79-year-old company competes nationwide and overseas for work with major brands like Chanel. "If you're bidding for a $100,000 job on a national basis and tax expenses push you a couple of percent higher, then I'm not competitive."
For generations, Minnesotans lived out the progressive argument that high taxes and high services were what gave the state its fabled quality of life. But the patience of business owners is being tried more than ever, as Dayton and the Democrats who now control the Capitol mull a menu of tax increases that would primarily hit company ledgers — just as most states are going the opposite way.
Dayton has proposed tax changes he says would make the system fairer and also bring in $2 billion in new revenue. Much of the gain would come from a state sales tax on "business-to-business" purchases like legal, accounting, banking and printing costs. Few states tax such services. He would also boost Minnesota's personal income tax rates from eighth to fourth highest in the nation, behind only Hawaii, California and Oregon.
Meanwhile, many other governors_Republicans and even some Democrats— are trying to cut their income taxes and make other changes to attract businesses. That includes many of Minnesota's neighbors in the Midwest, such as Wisconsin, Indiana, Iowa, Kansas, Missouri, Oklahoma and Nebraska.
Whether taxes kill jobs is one of the longest-running arguments in politics, and it's about to get tested in a big way in this region.
"I'm the kind of person willing to pay more in taxes because of all the attributes and benefits Minnesota offers," said John Taft, CEO of Minneapolis-based RBC Wealth Management. "But you do reach a tipping point where the cost of government gets too high and this would push us past that tipping point."
Dayton wants the new money to eliminate a $1.1 billion state budget deficit. He also wants more for public schools and colleges, job-creation programs and low-income medical assistance. He's arguing that such amenities are what perennially put the state near the top of livability lists.
"I've heard this for 30 years and I'm not insensitive to it," Dayton said of the argument that high taxes make businesses look elsewhere. However, "I say we're not the lowest-taxed state, we're the best value for people's taxes." Minnesotans try not to scoff as they contrast the state's attributes with the likes of its more down-market neighbors. Minneapolis' bustling downtown Nicollet Mall, the Twin Cities' array of theaters and first-class museums, and the state's expansive parkland and its 19 Fortune 500 company headquarters — the second-most per capita in the country_are what make talented people want to be here, they said. It's no coincidence that Minnesota's unemployment rate is lower than Wisconsin's (5.5 percent vs. 6.6 percent in December) and its per capita income higher ($44,560 vs. $39,575).
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