Showing leadership for the wealthy, the Minnesota GOP announced their program to cut corporate taxes in Minnesota...which will mean even less money for the already cash strapped Minnesota. Just how will this $200 million gift to the corporations be paid? Probably on the backs of taxpayers in higher taxes, fees or more cut in necessary services. (maybe that is what they mean by trickle down?!)
The GOP reasoning is corporations will have more money so they will employ more people. Naturally this trickle down theory has been in existence since Reagan was in office and it works just as well since then...it has zero ability to make corporations responsible or more likely to employ people but it does give them higher profit at our expense.
So let's recap the second week the GOP have control:
1. More welfare for corporations that taxpayers can expect to pay for...
2. Less regulations for corporations that taxpayers can expect to suffer for...
3. Add more $$$ to Minnesota's existing $6.2 deficit...
With no budget plans, the GOP make giving aid to corporations a priority without even securing so much as a promise to hire one additional person for their $200 million in cuts...sigh...laissez les bons temps rouler...
"Don't sit there mumblin', talkin' trash, if you want to have a ball,
you gotta go out and spend some cash, let the good times roll..."
Key observation by the Strib writer ... "A week after seizing power, Senate Republicans unveiled their first legislative proposal ...
You probably want to check the $200 figure ... it may actually be $400 offset by the assumption that business will "grow" and thus be paying more taxes even at a lower rate.
Forget the cutting the Corporate tax rates since there are so many deductions, it may not be the bigger concern ... but with Minnesota having the fourth highest advertised rate, it would be good to make some changes.
The bigger issue is the cuts to property taxes. Minnesota taxes are pretty crazy ... for example, did you know that a Twix bar or Kit Kat is considered a cookie and therefore not candy, and thus not taxable ... but try to argue that with a clerk ... but the MN Revenue says it's so.
Business have to pay property taxes regardless of how profitable they are ... and with the State cutting LGA, that pushes up property taxes. This could be an impact on rental units.
I guess the real question is : How many jobs will it create ?
I would advocate a cut to the Unemployment Compensation tax for businesses that rehire laid off workers ... that is killing some businesses that laid off workers in 2009 and now are paying the big bills. (UC is paid based on a businesses layoffs ... so you pay after the fact ... and it adds up quickly.)
FYI : The Illinois legislature just approved a budget balancing tax ... raising the income tax 2% ... for individuals the rate will go to 5% from 3%. This will be in effect for four years and would be accompanied by state spending limits through fiscal 2015.
Comparing MN to IL for individuals, MN is still higher (but I don't know what would happen when factoring in sales tax [MN does not tax clothing sales, but IL does] nor property taxes.)
Corporations also got hit.
Illinois Corporate Income Tax rate would be at 9.5% (including their 2.5 percent personal property replacement tax, compared with 7.9 percent in Wisconsin, 8.5 percent in Indiana, 6 percent in Kentucky, 4.95 percent in Michigan and 9.8 percent in Minnesota.
The reaction from the business community has varied. Boeing, which had recently relocated its corporate headquarters there, said it did not see a significant impact on its operations from the increase. While, Caterpillar denounced the increase. In an opinion piece in the Chicago Tribune on Tuesday, Caterpillar CEO Doug Oberhelman wrote : 'It's no secret that, when making investments, businesses have to consider the costs. And states with lower-cost environments provide an opportunity for business and their employers to succeed. That's not the type of environment we are creating in Illinois with these tax proposals.'
Hmmm .... CAT curtailed its workforce in New Ulm and has laid off workers all around the country ... and that was before Illinois' legislature did anything ... but CAT has expanded overseas.
IMO, tax rates have less impact on business decisions than other factors - workforce cost, supplier network, etc. ... but with Minnesota having such a high advertised rate, it does not make us look good.
The question for the MN-GOP idea of cutting corporate tax rates is : how do you replace the lost revenue ... these rates could have been cut last session but the MN-GOP balked at any tax rate changes. As I recall, Pawlenty's 21st Century Tax Reform Commission Recommended lower Corporate rates but increased the Sales tax.
Minnesota may have "image" problem when compared to other states, but overall, corporations seem to be doing A-OK. Corporate profits are at record highs, companies are sitting on vast amounts of cash, and at this week's Chamber of Commerce event in DC, they were incouraging governments to invest in infrastructure ... when asked how it should be paid for, the answer was "God knows" ... seriously, that was the answer ... they don't want to pay for it, but they know investing in infrastructure is needed.
A reporter asked the Chamber's CEO, TomDonohue for a suggestion of what corporate America, with its record profits, should do to put people back to work. "I got to think about this for a minute," Donohue said, then added: "I think the most important thing to tell a company is to return a reasonable return to their investors."
Well, the investors would be happy if tax rates are cut, but what about Minnesotans that will end up making up the shortfall ?
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