As the Minnesota Legislature kicked off its four-month 2024 legislative session today, Doug Loon, president and CEO of the Minnesota Chamber of Commerce, laid out his thoughts on what should guide this session: holding the line on spending, reforming our permitting process, and preventing further workplace mandates.
Unfortunately, even if the DFL Legislature listens, the damage may have already been done when they blew and $18 billion surplus last year, raised taxes by $10 billion, bloated the budget by 40%, and wasted $730 million on a palace for politicians.
Three principles for this year’s legislative session
Costs matter: Keep jobs and opportunity in Minnesota
By Doug Loon
Minnesota’s economy is the bedrock of our shared success. A good economy builds from a foundation of innovation and hard work. A good economy makes Minnesota an attractive place to start a business or raise a family because it provides economic opportunity and quality of life for all Minnesotans.
But a good economy doesn’t just happen. It needs businesses to create jobs and it needs a long-term pipeline of talent. It relies on reasonable costs and rational regulations, and it needs elected officials who understand the impact of their actions on both employers and employees.
Last legislative session, lawmakers passed some of the most wide-sweeping and consequential policies in decades. They turned a near $18 billion surplus into a deficit in the next budget cycle. They increased taxes by $10 billion over a four-year period and increased spending by a whopping 36%. A commonly made argument in support of these policy changes was that they would improve the lives of Minnesotans.
Many of these new laws increased costs substantially on Main Street and headquartered Minnesota businesses, their employees and their customers. But costs also increased for every other employer in our state, too — schools, colleges, nonprofits, hospitals, churches, cities and counties. For some, the costs may be passed through to their customers. For others, these costs could mean increases in property taxes or legislative requests to fund their higher budget needs. The result is unsustainable growth in government spending and tax pressures in the long term.
It’s well-documented that Minnesota has high taxes. And the argument goes that with high taxes comes a high quality of life. But we don’t just have high taxes. We also have high child care, housing and college tuition costs. Minnesota is becoming an increasingly expensive place to live and grow a business.
When costs and regulatory burdens are high for businesses, investment moves elsewhere. Minnesota-based companies are expanding in other states at a higher rate than out-of-state companies are expanding and investing in Minnesota. Since 2020, there has been a net investment deficit of 54 projects, 2,500 jobs and $6.6 billion in capital expenditures. Our corporate tax rate is the highest in the country now. Our individual income tax rate is sixth highest — and most small Main Street businesses pay their taxes through their individual income taxes. When costs are high for the public sector, the public pays through higher fees and taxes.
It was a consequential legislative session last year at the Minnesota Capitol. Impacts of many of these policies that impose new mandates, taxes and spending won’t be realized for a year or maybe more. This year lawmakers must:
- Hold the line on spending and cost increases. Our state budget is the largest it has ever been, with a precarious outlook for the next budget cycle. The state must live within its means. There should be no additional tax or regulatory burdens placed on Minnesota employers. There should be no new cost increases on Minnesota families in the form of fees or payroll taxes.
- Reform our permitting process. Companies that choose to invest here face greater uncertainty and lengthier timelines than in other states. Sensible environmental regulations that protect the state’s cherished natural resources and produce timely and reliable outcomes for businesses will allow them to locate, stay and grow here.
- Prevent further workplace mandates. Employers design benefits for their unique workforce. They know what will retain and attract employees to their industry and business. The number and scope of workplace mandates that passed last session — in addition to the lack of state guidance on compliance — are crushing small businesses in our state. The one-size-fits-all paid leave program alone will increase payroll taxes by at least 0.7%, forces employers to provide paid leave for nearly 40% of an employees’ work year and shifts benefits administration to a new government agency with 400 new employees. This is a seismic shift in cost and workforce strategy during a historic workforce shortage. Balanced employment-related policy can benefit employers, employees and all of us as taxpayers, while enabling our economy to grow.
These are reasonable approaches to an ever-changing economy, in a competitive national landscape for businesses and talent. Costs matter — not just for business, but for all Minnesotans.
Doug Loon is president and CEO of the Minnesota Chamber of Commerce.