Minnesota Senate Republican’s first bill provides a big cut to corporations and reduces corporate property taxes to 2009 levels. In light of our $6.2 billion budget deficit, we just cannot afford providing big tax cuts to corporations.
Helping large corporations with tax cuts will add at least $200 million to the state’s budget deficit. We need to end this session with a balanced budget, meaning Republicans will need to offset these corporate tax cuts with another $200 million in cuts somewhere else in the budget such as schools, colleges, nursing homes, or property tax relief programs.
Cutting corporate taxes is a poor tool to spur economic growth. Not only is it extremely costly to our state, it provides absolutely no guarantee it will create jobs or help Minnesota’s small businesses and entrepreneurs. Small businesses are responsible for 65 percent of the new jobs created over the past 17 years, and very few will benefit from lower corporate taxes. In fact, according to the most recent data from the Department of Revenue, 96 percent of small businesses were not subject to Minnesota’s corporate income tax.
Another problem with their corporate tax cut is that nearly half of corporate taxes in Minnesota are paid by out-of-state corporations. According to a 2007 report from the Department of Revenue, 46.5 percent of corporate taxes are paid by corporations headquartered outside of Minnesota. So, the corporate tax breaks are not helping Minnesota companies, they are helping companies from all over the nation. That just isn’t right.
Despite Republican rhetoric, Minnesota has a competitive tax climate for businesses. Tim Pawlenty’s own agency website states:
Minnesota has four distinct seasons, but our business climate is always warm and sunny, with ideal conditions for growth.
Strong pro-business policies. Competitive tax rates. Favorable workers’ compensation costs. Lower operating expenses. R&D tax credits. Streamlined regulatory processes.
These are just a few of the tremendous competitive advantages that consistently rank Minnesota as one of the top states for business and have helped thousands of companies turn mere potential into outstanding achievement.
The fact is, Minnesota does not have the 3rd highest corporate tax rate in the nation. Once all the credits and subtractions are accurately accounted for, Minnesota’s effective tax rate on corporations is only 3.1 percent, the 15th lowest in the country. That is probably why Minnesota already has more Fortune 500 companies per capita than any other state. And that list has grown substantially in the past few years as more and more companies recognize the tremendous advantages of locating in Minnesota.
Our number one priority this session is balancing the budget, creating jobs and positioning Minnesota for long-term prosperity. But the facts are clear: cutting corporate taxes doesn’t help small businesses, doesn’t provide immediate job growth, and only serves to pad the bottom line of the corporations that are already experiencing record profits.