Manufacturing Voice E-newsletter

April 2007

Focus on taxes as adjournment looms
Governor Pawlenty and the Legislative leadership remain billions of dollars apart on resolving the budget. And many of the legislative proposals would balance the budget on the backs of business.

The primary red flags to your business are:

Personal income tax
The Senate bill would create a fourth bracket at 9.7 percent, the highest personal income tax bracket in the nation. It would affect taxable income above $250,000 for joint filers and $141,250 for single filers, affecting more than 93,000 tax returns. Proponents characterize this as a tax on the rich – far from it. This is a tax on thousands of small business owners, Sub-S corporations, partnerships and sole proprietors who run their business income through their personal tax returns. We expect to see a new fourth tier in the House bill as well.

Statewide property tax
The Senate proposes to increase the statewide property tax which falls almost exclusively on commercial/industrial and utility properties. Under existing law, this tax increases each year by the rate of inflation and already is expected to generate another $108 million in FY 2008-2009 and another $71 million in FY 2010-2011. Yet the recommendation is for an additional $222 million increase in business property taxes in FY 2008-2009 and an additional $467 million increase in FY 2010-2011. Minnesota businesses already have three times the property tax burden of homeowners and pay among the highest property taxes in the country.

Please tell your senators and representatives that the projected $35 billion budget for FY 2008-2009, which includes an estimated $2.2 billion budget, is plenty of money to effectively deliver programs and services if they spend wisely on statewide priorities. This two-year budget represents a nearly 10-percent increase in spending, which would be ample for most businesses and households to operate.

On the positive front:

Capital equipment sales tax We remain hopeful that the surplus will provide the opportunity to change the sales tax refund on capital equipment to an up-front exemption. It is currently included in the Senate tax bill and we are hopeful that the House will include it as well. The refund program continues to be cumbersome and time-consuming for businesses and it needlessly hampers cash flow, especially for small and medium businesses. However, businesses should not pay a premium of higher property taxes and personal income tax for this long overdue up front exemption.

Workers' compensation
It’s no surprise to you that work comp premiums are on their way up. Legislation unanimously advanced by business and organized labor representatives on the Workers’ Compensation Advisory Council has been introduced.

(HF 2248, Nelson, DFL-Brooklyn Park/ SF 2039, Bakk, DFL-Cook): The Workers’ Compensation Advisory Council bill addresses the recommendations of Department of Labor and Industry Commissioner Scott Brener, which are intended to curb rising medical costs. Increasing medical costs have been the driving force for rising workers’ compensation premiums. Due to cuts in Medicaid, Medicare and other reimbursements, hospitals are cost shifting to workers’ compensation cases. To that end, the bill proposes to reduce some payments to hospitals and also increases benefits to some injured workers. This bill also keeps the Advisory Council process intact.

Participate in national manufacturing survey
RSM McGladrey, a member of the Minnesota Chamber, is conducting its annual nationwide manufacturing survey and invites your participation. Last year, this survey gathered more than 1,000 responses, and the results were featured in Forbes.com, Business Week Online, and Manufacturing.net. The survey also caught the attention of key policy-makers in the U.S. Department of Commerce, The U.S. Department of Labor and the National Economic Council. The survey is due April 25. To participate, follow this link www.rsmmcgladrey.com/survey9.

Attention Xcel customers
Xcel energy wants your input. As you may know, two of Xcel’s Twin Cities power plants are being converted from coal to natural gas. These plants will run about 20% of the time and their fuel cost will be passed through to all Xcel customers. The company is considering the adoption of a “hedge plan” designed to stabilize the price of natural gas, but probably at some cost premium. What are your views on the stability and predictability of price vs Xcel purchasing natural gas on the open market or a combination of the two? Let us know your views by contacting Bill Blazar at the Minnesota Chamber at bblazar@mnchamber.com or (651) 292-4658.

Feature your product at the Minnesota Chamber
The Minnesota Chamber offices feature a display of Minnesota made products in the lobby area. We’d love to include yours! Contact Jennifer Byers at jbyers@mnchamber.com or (651) 292-4673.

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