Bak: Minnesota's governor destroying business climate
Minnesota may be famous for its lakes, but the state also garners national attention for its high quality of life and economic opportunities. That is why we started our business here.
Medical technology thrives in Minnesota with valuable innovations coming from the Mayo Clinic, Medtronic and hundreds of other small, innovative companies. Many of these innovations come from the multitude of well-educated students the state graduates every year.
This well-educated work force has also made Minnesota a great home for Target, 3M, General Mills and many other Fortune 500 businesses. Each of these corporate giants also contribute to the strong civic glue that has made Minnesota a great state to live, raise a family and do business in … at least for now.
Gov. Mark Dayton (D) and the Minnesota Legislature seem intent on disrupting the competitive trajectory developed over the last century and replacing it with a toxic blend of massive tax and spending increases. The recent omnibus tax bill passed during the 2013 legislative session is just one example of this change for the worse.
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Under the bill, franchise taxes are nearly doubled, online sales tax is enforced and a new sales tax is imposed on warehousing and storage firms. Sales tax will also be collected from businesses selling telecommunications equipment, making technology less affordable for Minnesotans.The warehousing tax is especially crippling to such businesses in Minnesota because Minnesota is the only state in the country to have a warehousing tax.
These new taxes make problems worse for Minnesota-based small businesses, who already pay the third-highest corporate income tax rates in the nation at 9.8 percent. Minnesota business owners are vocal about these new taxes and what they have to say is not pleasant.
Several well-known (and even namesake) businesses have threatened to relocate to surrounding states in order to avoid tax pressure, while others have simply halted expansion measures to avoid a loss on their investment.
Already facing tighter profit margins as a result of the Great Recession, many businesses are not able to absorb the additional and unnecessary blow of significantly increased taxes.
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Minnesota's neighbors are more than willing to accept any companies that are willing to cross state borders. According to the Washington, D.C.-based Tax Foundation, it is not difficult for nearby states to shine when compared with Minnesota ranking 45th in the nation when it comes to business tax climate.
The impact of these massive tax increases is twofold: a loss of Minnesota jobs and a decrease in accessibility of the goods or services offered by the business. Frankly, all of it makes Minnesota less competitive and a noncompetitive outlier.
Restrictions and regulation also threaten growth. New minimum wage laws have been proposed that would harm low-skilled employees, the businesses that employ them and raise prices significantly for consumers. Not exactly a win-win.
In addition to this, ever-increasing proposed environmental restrictions look to further saddle Minnesota corporations with burdensome and often redundant regulations. Strong unions also put a strain on business leaders in Minnesota as their influence and power make the state less competitive than even our Upper Midwest neighbors in Wisconsin and Michigan.
Minnesota can continue to prosper if its lawmakers recognize the elements that have made it successful in the past. Our state needs to become a place where new businesses are welcomed and provided with a highly skilled work force. It is not too late for legislators to remove some of these burdens, but they must do so before our loss becomes another state's gain.
—Dirk Bak is the president of SDQ, a janitorial services company based in Minnetonka, Minn.
(Editor's Note: CNBC reached out to the governors' offices of all 50 states with the opportunity to submit a blog post on why their state is a top state for business. Minnesota, which ranked 15th among the Top States for Business 2013, did not respond to our request.)