Lawmakers battle over corporate tax cut

A Senate bill looks to cut corporate income tax in half by 2017.

Michael Zittlow

Battles erupted at the state Capitol on Thursday over proposals to reduce corporate property and income taxes.

In the wake of the Hutchinson, Minn. layoffs that sent 600 Minnesota jobs to Wisconsin and overseas this week, Republican lawmakers painted Minnesota as unwelcoming to businesses.

A Senate bill geared toward fixing that image problem would progressively cut MinnesotaâÄôs corporate income tax down from its current level of 9.8 percent to 4.9 percent by 2017. The proposal would cost $200 million.

âÄúIt sends a message to job creators: please come to Minnesota,âÄù Sen. Geoff Michel, R-Edina, one of the billâÄôs chief authors, said.

Michel said Minnesota has the third highest corporate income tax rate in the nation, and without changes, other states that have reduced their rates, like Florida and Iowa, could trump Minnesota.

âÄúThey are racing ahead of us,âÄù Michel said.

Paul Huot, owner of Huot Manufacturing in St. Paul, said the high income tax rate has negatively affected his business. HeâÄôs had to layoff staff and reduce products.

But Sen. Thomas Bakk, DFL-Cook, said the state couldnâÄôt afford a spending bill geared toward corporations due to the deficit.

âÄúLetâÄôs get a little dose of reality here,âÄù he said. âÄúI know, it feels good to tell everyone weâÄôre going to reduce their taxes âĦ but we canâÄôt.âÄù

While Michel was careful not to directly link the Hutchinson Tech layoffs to the stateâÄôs corporate tax, he said it was âÄúa reminder that business owners have options.âÄù He said other businesses could follow suit, or choose not to develop in Minnesota because of the high rates.

Bakk said the corporate income tax rate is not the only thing companies look at when weighing Minnesota as an option. Other deductions and credits make the actual tax rate for businesses lower than Michel claims, and reducing the corporate income tax would mostly help out-of-state companies.

Jill Larson, spokeswoman for the Minnesota Business Partnership, which represents some of the stateâÄôs largest companies, said corporate income taxes are regressive and are paid for by layoffs or raising prices.

Bakk said there is no way to ensure that well-paid CEOs wouldnâÄôt raise their own compensations with money saved from an income tax break.

But Republicans said what companies did with the saved money wasnâÄôt the governmentâÄôs business.

âÄúItâÄôs not our money,âÄù Michel said.

Sen. Larry Pogemiller, DFL-Minneapolis, said lifting the corporate property tax would leave holes in the budget that would have to come from areas like K-12 education.