Others’ Opinion: Tax reform; Don’t wait until we can’t compete

Published 10:01 am Wednesday, February 1, 2017

St. Paul Pioneer Press

Distributed by Tribune Content Agency

Until Minnesota gets the message about too-high taxes, that message needs to be restated.

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The Minnesota Business Partnership and Tax Foundation do so persuasively in a guide to taxes and the economy released last week. A “chart book” and interactive online version are on the website of the partnership — the organization that represents the CEOs of the state’s largest businesses — at mnbp.com.

The report emphasizes the high tax burden on Minnesotans and the business that drive the state’s economy — and the outlier status that puts us at a competitive disadvantage with other states.

The succinct reaction from Gov. Mark Dayton: “Same old, same old.”

Yes, the partnership’s executive director, Charlie Weaver, told the editorial board last week. The state’s tax climate “hasn’t gotten better.”

The litany bears repeating. According to the report, Minnesota:

* Ranks 46th among the states on the 2017 State Business Tax Climate Index, a measure of the structure of each state’s tax code based on a review of more than 100 variables. States with low rates, broad bases and simple structures score the highest. Minnesota falls far short when it comes to those worthy principles that should guide reform.

* Has the eighth-highest tax burden in the nation — a measure of the amount of personal income residents pay in state and local tax, 10.8 percent in fiscal year 2012. The national average is 9.9 percent.

* Has a state corporate income tax rate of 9.8 percent, the third-highest in the nation.

* Is one of only a few states that still have an estate tax.

The time to consider corrective measures is at hand. Minnesota’s economy has traditionally fared better than the U.S. average, the report says, noting relatively strong income per capita and low unemployment. But charts discuss some trends that suggest our “competitiveness is being challenged”:

The slowing pace of job growth: For many years, job creation here outpaced the nation. In recoveries following recessions in 2001 and 2007-09, however, our job growth trailed the national average, “suggesting Minnesota’s employment fundamentals are less robust than they used to be,” according to the report.

Net out-migration: Throughout the 1990s, Minnesota consistently saw an “inflow” of people moving to the state, the report says, noting that the trend has reversed. We can’t say for certain why people are moving — jobs, climate and family connections come into play in moves both ways — “but what we can say is that every year since 2002 more people have left the state than have come into the state,” Tax Foundation economist Nicole Kaeding told us. Findings are based on IRS data that track the states in which individuals file their returns.

It’s unimaginable that tax policy doesn’t also factor in as people decide where to live and die.

The report draws attention to other issues, including the complexity of the state’s property tax, which has 52 different classifications, far more than any other state. South Dakota, with 14 classifications, is next-highest. Another, the report says, is the common misconception that businesses pay only corporate income tax. The chart on that topic shows property, sales, income, excise, unemployment insurance and license and other taxes.

The report also is well timed. As Weaver observes, almost one-third of state lawmakers are new to their jobs at the Capitol after the November election. It’s intended, he told us, to serve as a diagnostic tool and a “snapshot of where we are today.”

Its point is clear. Minnesota can no longer afford to be such an outlier when it comes to taxes.