Biz Leaders, Lawmakers Like Dayton’s Retreat on Taxes
Many of Minnesota’s business leaders and lawmakers appear to have breathed a collective sigh of relief when Governor Mark Dayton announced plans to drop the controversial business-to-business tax expansion from his budget proposal.
Dayton’s initial budget pitch, which was released in January, featured an expansion of taxes to new products and services, including brokerage and investment counseling, legal and accounting services, advertising and PR services, and more.
The plan prompted outcry from local business leaders from a variety of industries, some of whom said the change would significantly hurt business and place them at a competitive disadvantage. The Minnesota Chamber of Commerce was an opponent. Some companies reportedly said the proposed changes would prompt relocation; meanwhile, the leader of a local ad agency told Twin Cities Business that his firm might be forced to lay off workers if Dayton’s plan moved forward.
But Dayton said Friday that he intends to take that part of his budget plan off the table. And to little surprise, the announcement was well received by many in the local business community.
Doug Spong, president of Minneapolis-based ad agency Carmichael Lynch, told the Pioneer Press that the announcement “gives me a sigh of relief,” and “it’s nice we were able to get that off the table.”
Walter Pickhardt, a lawyer and tax specialist at Minneapolis-based Faegre Baker Daniels LLP, told the St. Paul newspaper that Dayton’s initial plan would have given companies an incentive to pass over Minnesota attorneys in favor of those from other states.
Top lawmakers on both sides of the aisle also praised Dayton’s plan to drop the heavily criticized tax on business services, according to a report by MinnPost. Even Democratic lawmakers had reportedly offered a lukewarm reception to the governor’s pitch since it was released.
Another report by MinnPost suggests that, by taking the much-maligned services tax off the table, Dayton has cleared the path for business leaders to switch gears and now look to block his attempt to raise income taxes on the wealthiest Minnesotans.
Meanwhile, the Pioneer Press reported that Dayton also plans to drop his plan to expand sales tax to certain consumer products, such as clothing items costing more than $100. His initial plan called for taxing some new products, while lowering the sales tax rate from 6.875 percent to 5.5 percent.
Changes to Dayton’s plan come after a new economic forecast recently lowered the state’s projected budget deficit from $1.1 billion to $627 million, reducing the amount of additional tax revenue needed.