Editor’s Note-What Business Thought

Editor’s Note-What Business Thought

Do you remember regarding state government as an enemy?

This issue contains the results of either the 11th or 12th What Business Thinks™ poll, depending on how you count.

Although the trademarked “What Business Thinks” name wasn’t used until 1996, the magazine’s first poll of Minnesota business leaders (sponsored by National City Bank of Minneapolis, now M&I) was taken in early 1995, and the results were analyzed in the May 1995 issue.

The headline—”Government: Ouch!”—summarized succinctly the low regard in which Minnesota’s lawmakers and regulatory agencies were held among poll respondents, 38 percent of whom called Minnesota a “poor” place to own a business.

The problem wasn’t the economy. The economy was growing: 79 percent of respondents said they expected their own company’s 1995 sales to be higher than in 1994, and only 3 percent expected their revenues to decline; 70 percent expected an increase in profits; 54 percent expected to add employees in 1995.

But as we reported in the analysis of the poll, “business owners make it clear that they regard the Minnesota Legislature and various state agencies as providers of hindrance, not help—as adversaries, not allies.

“They do believe that [then Governor] Arne Carlson is on their side. Eighty-four percent say that the Carlson administration, and presumably the governor himself, is either ‘somewhat’ or ‘strongly’ pro-business. Lawmakers and bureaucrats, however, are regarded as enemies of enterprise. Only 8 percent of the respondents to the poll give the legislature credit for being more favorable than neutral toward business. Seventy-six percent call the legislature ‘anti-business.’ Twenty-nine percent say that it’s ‘strongly anti-business.’”

Workers’ compensation costs—then the highest in the nation—were identified as the biggest state-imposed burden to business, followed by commercial property taxes.

In his engaging analysis of the present What Business Thinks poll, Mitch Pearlstein, founder and president emeritus of local conservative think tank the Center of the American Experiment, notes that respondents selected health care costs as their biggest concern, followed by availability of skilled workers. Concern about business taxes persists, but it is rivaled by concern about education standards. Overall, 69 percent of respondents say that Minnesota is generally “going in the right direction.”

The contradistinction of this year’s results with those in 1995 could hardly be sharper. What happened? In a word: reform. From 1995 through 1998, under the second-term Carlson administration, government-created conditions for doing business improved substantially.

After years of effort by Carlson and business organizations, especially the Minnesota Chamber of Commerce and the Minnesota Business Partnership, a bipartisan majority of lawmakers agreed on the last day of the 1995 session to an extensive package of workers’ compensation reforms that diminished almost to zero the difference between premiums paid in Minnesota and in adjacent states.

The legislation reduced workers’ compensation payroll taxes from the highest in the country to 26th among states, and a few cents per $100 in payroll below the national average. That saved Minnesota businesses roughly $150 million in 1996 alone. A Virginia, Minnesota, trucking company saw its premiums fall by 50 percent; at the St. Paul Hotel, they fell by 33 percent.

That wasn’t all. A year later, property taxes on existing commercial property were reduced by roughly $700 million a year. In 1997, Minnesota’s sales tax on capital equipment was repealed. A tax on investment, not profit, it was arguably the state’s most misguided business tax of all time, penalizing capital-intensive industries, which tend to provide high-paying jobs. In the same year, the legislature nearly tripled the funds available for custom job-training programs through the Minnesota Job Skills Partnership.

No, Minnesota did not become a low-tax state, and Minnesota businesses did not become undertaxed. Neither, however, was there significant retreat from the reforms of the late 1990s. Three years ago, after the Ventura administration left a projected $4.2 billion budget deficit for their successors to address, no member of the legislature from either party introduced legislation to address the deficit by increasing taxes on businesses.

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