Legislative Wrap Up
Small Business Minnesota played a pivotal role at the legislature this year. Our board and members corresponded with the Governor, met with commissioners, testified before 18 committees, interviewed with reporters, held press conferences and published articles in major publications.
Please see the Small Business Minnesota legislative wrap up below. As we supported small businesses, please consider supporting Small Business Minnesota with either a one-time contribution or by becoming a member, if you’re not already.
Also, we are preparing the Small Business Minnesota legislative agenda for the upcoming session. Please send your public policy concerns to firstname.lastname@example.org
Minnesota Health Insurance Exchange
Small Business Minnesota played a significant role in influencing Minnesota’s health insurance exchange as we advocated for policies that benefit and protect small business owners. Check out Small Business Minnesota’s op-ed piece for details.
The legislature implemented vital objectives for small business owners. Although there was a push for small business owners to pick up the marketing tab for the insurance companies, the legislature heard us and made certain the insurance companies would pay for their own marketing in the end. Additionally, insurance lobbyists pushed for insurance companies to oversee the exchange but a strong conflict of interest provision was placed in the bill instead.
As a compromise to insurance lobbyists, a strong active purchaser will not be implemented until 2015. A strong active purchaser is paramount to ensuring a marketplace that competes on price, increases quality and offers a manageable number of easily comparable plans. Without its immediate implementation, we are uncertain if MNsure will be able to offer as low premiums as it could have and a reasonable number of apples-to-apples insurance plans.
We will be watching the board’s progress and plan to meet with the small business representative in the near future.
Business to business services tax
Small Business Minnesota opposed a business-to-business (B2B) services tax. Almost all economists agree that it is best to assess taxes closest to the product reaching the end user and then tax business profits. Small Business Minnesota corresponded with the Governor, met with Revenue Commissioner Frans and testified in committees against B2B services taxes which were then removed from the budget.
However, very late in the session some B2B taxes were proposed for warehouses and some IT and communications-related services. The good news is that these taxes do not take effect until 2014 which provides time for the legislature to reconsider this topic and correct this economically inadvisable tax.
Small Business Minnesota supports investments in education today for a ready workforce tomorrow. This legislature made significant strides in addressing 10 years of cuts to education and one of the nation’s worst achievement gaps (and employment gaps). We recognize that education alone will not close the gaps that have been compounded by an increase in poverty, lack of affordable healthcare and permanent housing and decreasing parental involvement. However, this legislature’s investments in early childhood education, all-day kindergarten, freezing college tuition and more will help address many education needs.
Small Business Minnesota supported efficient and effective investments in the state’s infrastructure to get employees to work and goods to market. More attention needs to be given to equal access to the Internet (particularly for businesses in greater Minnesota) and transportation remains underfunded.
Small business tax: Income tax
Small Business Minnesota expressed its support of moving toward tax fairness and balance. While we did not testify for or against income tax policy, we did clarify fact from fiction to aid in decision making.
As conversations took place about income taxes, we reminded lawmakers that 96 percent of small business owners take home an annual income less than $150,000; Minnesota’s hundreds-of-thousands of sole proprietors average an annual salary of $29,000. [i] Small business owners are largely the middle class and tax policy needs to reflect this.
Clarification: Small business owners who take home more than $150,000 in annual income and file as a head of household or live in a household with more than $250,000 in annual income, will see a 2% tax only on the income above this amount. Additionally, this tax does not affect operating income within the business.
Tax fairness for small business: Internet sales tax
Small Business Minnesota supported the Internet sales taxes in fairness to small brick-and-mortar businesses.
Tax fairness for small business: Corporate taxes
Small Business Minnesota expressed its concerns about tax fairness for small businesses. Small businesses are collectively the state’s largest employer yet tax breaks are almost always given to big businesses. More work needs to be done so legislators understand:
- The vast majority of small business owners are unaffected by corporate taxes; most report their profits as income and are taxed as individuals.[ii] Policies around corporate taxes should not be presented as small business policy.
- While Minnesota may have the 4th highest corporate tax rate, we have the 11th lowest effective tax rate[iii]. This is indicative of a tax scheme that favors some businesses over others, and most of it favors big business over small businesses.
- We support closing the estimated $2 billion in onshore corporate tax loopholes before providing additional corporate tax relief. We acknowledge the work done to close some offshore tax loopholes.
- Minnesota has $25 billion dollars in tax expenditures in addition to the $38 billion in proposed spending. The legislative auditor and state economists have called these tax expenditures excessive and inscrutable. More needs to be done to review tax expenditures on a regular basis for return on investment, to place any and all new tax expenditures on sunset schedules and to move at least some, if not all, of the expenditures into the regular budget. [iv] This session, millions of tax dollars were given to large corporations that make billions in profits. Small businesses saw little relief.
- We recognize the reduction in unemployment tax that may affect some small businesses.
Long-term property tax
Small Business Minnesota worked to repeal the proposed $500 property tax refund in favor of more long-term, meaningful reform. We applaud the repeal of the refund in place of permanent cuts. More work needs to be done however. This legislature has shown promise in moving toward long-term, fair property tax relief that business owners have asked for: business property tax that is fair and balanced from one business to the next and correlates to income and business profit/loss.
[i] Latest available Census data.
[ii] Minnesota Secretary of State Office.
[iii] Ernst & Young state corporate tax report.
[iv] Learn more about tax expenditures.
Minnesota’s tax loopholes on automatic pilot | Stories, by Steven Dornfeld on 7/27/11