| Governor updates businesses on state issues |
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| Wednesday, 01 April 2009 | ||
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Staff writer Gov. Tim Pawlenty had the ears of the north metro business community the morning of March 26, so he discussed his goals to make Minnesota more attractive to businesses.
Rep. Peggy Scott, R-Andover and Rep. Tim Sanders, R-Blaine attended the MetroNorth Chamber of Commerce and Twin Cities North Chamber of Commerce breakfast meeting March 26 at the Mermaid Event Center in Mounds View. Pawlenty said the state budget will be balanced, but in this rapidly changing world Minnesota needs to do more than balance the books. It needs to become a global competitor. “This is not the 1970s where we’re competing against western Wisconsin or South Dakota,” Pawlenty said. “The world as you know has become hyper-competative on a global scale in just about every area of operation.” The corporate income tax rate in Minnesota is 9.8 percent, which is third highest in the world, according to Pawlenty. According to the Federation of Tax Administrators, Pennsylvania’s rate is 9.99 percent and the District of Columbia (Washington, D.C.) has a 9.975 rate. Pawlenty would like to see Minnesota’s corporate income tax rate cut in half. To compare, the lowest corporate income tax rate is 1 percent for the lower tax brackets in Alaska and Arkansas. Hawaii’s lowest rate is 4.4 percent. Louisiana’s lowest rate is 4 percent. Maine’s lowest rate is 3.5 percent. Mississippi’s lowest rate is 3 percent. Kansas has a 4 percent rate. Colorado’s rate is 4.63 percent. Pawlenty would like to see an up-front sales tax exemption for the purchase of capital equipment. He would also like businesses to be able to write-off this equipment the first year instead of taking it as a depreciable item over the years. He would like tax incentives for people to invest in green technology businesses. He also wants a capital gains exemption of 50 percent for qualifying investments for new businesses in Minnesota. Right now, this is taxed as ordinary income. He wants investment tax credits so people are motivated to invest in businesses early in the development stage. Being prudent with the budget is also key for the state. Pawlenty said many in the room are old enough to remember the savings and loans scandal, the tech bubble and burst and now the housing crisis. Pawlenty said when people ignore the financial laws of gravity, you can’t do that in the intermediate and long-term without dramatic consequences. He said it is important to understand history at a time when federal government spending is ramping up spending under the American Recovery and Investment Act to boost the economy. “All of us should be concerned about the accelerated pace of that,” he said. Pawlenty said the United States is pleading with communist China to buy American debt, which he said is a big warning sign that something is wrong. A person asked Pawlenty how the state could accept federal stimulus package dollars to help solve its budget issues. Pawlenty said for every dollar Minnesota sends to Washington, D.C., it receives 72 cents back. By that measure, Minnesota is the fifth lowest recipient of any state in the United States. “I don’t feel like it’s unfair for us to take our share of the federal money because we are a major net payer of the federal bill to Minnesota’s detriment,” Pawlenty said. Pawlenty said historically, the state budget from two-year budget cycle to two-year budget cycle has always increased. “We should set priorities and live within our means,” Pawlenty said. “That’s the experience that most of you in the room have right now. “I bet most of you are not experiencing accelerated revenues,” Pawlenty said. “I bet most of you are experiencing flat revenues or most of you are experiencing declining revenues.” Pawlenty said the state has to prioritize funding and not necessarily cut across the board. Another person asked what could be done to lower property taxes. Pawlenty said a property tax cap of 3.9 percent with some exceptions was put into place last year to help control growth. “Three-point-nine percent in this economy is not too tight. In fact it should be tighter in my view,” Pawlenty said. Pawlenty said local government officials’ concerns are that the state is significantly reducing Local Government Aid (LGA) and Market Value Homestead Credit (MVHC) payments to cities. “This is a system that is out of date,” Pawlenty said of LGA and MVHC. “The local government aid for cities was intended to help small cities or poor cities when they couldn’t reasonably afford to pay for local services locally. The thing has mushroomed into a municipal welfare program, an entitlement program that is unrecognizable in many respects.” Eric Hagen is at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it |
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