Wednesday, September 26, 2012

Minnesota Gets an F for Business

Yesterday, the release of the results of a survey of Minnesota business owners and managers lead to a back and forth on Twitter between myself and my former state representative Ryan Winkler (prior to redistricting). More on that exchange in a moment, first let’s see what the survey said.

The survey, which involved owners and managers of 350 Minnesota businesses, found 31 percent saying the state’s economy is improving, up from 13 percent last year. But nearly half think it’s the same, and less than a fourth reported improved profits.

That’s not surprising in the current economic environment of slow growth bordering on stagnation.

When it came to barriers, 69 percent said high taxes were either the biggest or second biggest hurdle. It was 34 percent for health care costs and 33 percent for hiring and retaining trained workers.

This too is not a surprise as the tax burden is regularly cited by businesses as the chief drawback to doing business in Minnesota and one of the main reasons some firms have left the state.

The survey also found that 60 percent of business owners and managers thought the state’s budget problems should be solved with a combination of both reduced spending and new revenue, not exactly the Republican position of late.

This almost seems like a contradiction to the previous point that high taxes were their biggest problem. Until you read further.

When it comes to reforming Minnesota’s tax code, a top issue for the Minnesota Chamber in 2013, 57 percent of business owners think it’s extremely important to raise taxes on voluntary behavior such as gambling, and buying alcohol and tobacco. Another 55 percent would like to see the tax code simplified so that taxpayers can more easily understand it.

So business owners and managers (like many other groups) are all in favor of “new revenue” (read more taxes) as long as that those new taxes are paid by somebody else. The problem is you can only jack up the so-called “sin taxes” so much and I believe that when it comes to alcohol and tobacco, the state of Minnesota already takes a pretty healthy cut. There’s also the issue that these taxes tend to disproportionately impact those in the lower income brackets and raises the question of whether it’s really a good idea to hit Joe Six Pack in the wallet every time he lives up to his moniker.

A surprising outcome of the Twitter exchange with Representative Winkler was that we both agreed that corporate taxes were too high in Minnesota and that the tax code desperately needed to be simplified. Now while I’m sure that Representative Winkler’s vision of what this would actually look like in practice and mine are quite different, at least we were able to find common ground in that these matters do need to be addressed by the Legislature.

This was the nugget that was really captured my attention:

The majority, 55 percent, also think Minnesota has a good business climate.

The article summarizing the survey results actually seems to present this as a positive. And that’s exactly how Representative Winkler pitched it in his initial tweet that got things started. No need to worry about Minnesota’s business climate after all. Only forty-five percent of the companies surveyed believe it’s negative and therefore may be considering moving to friendlier climes.

Are we really prepared to lower the bar this low? Are we really happy that FORTY-FIVE PERCENT of the companies in Minnesota believe that the state’s business climate is not positive? If I were the Governor or in the Legislature I wouldn’t be able to sleep at night unless I was confident that at least eight out ten businesses thought they were operating in a state with a good business climate. Fifty-five percent is a failing grade.