Tax hikes could slow Minnesota's economic recovery
How would federal tax increases impact Minnesota's economic recovery?
Minnesota, like the nation as a whole, is seeing its economy rebound as the pandemic comes to an end. But massive federal tax increases threaten to derail the recovery, hurting Minnesota job creators and families.
Throughout Minnesota’s last legislative session, the Minnesota Chamber asked lawmakers to follow a “do no harm” principle to guide the economy out of the COVID-19 pandemic and usher in an era of economic recovery. Our delegation in D.C. should follow this same principle, instead of raising taxes and costs.
The president’s recent budget proposal includes $3.6 trillion in tax hikes. These tax increases will be paid for by workers and families through lost jobs and lower wages and will impact thousands of small businesses.
A look at the numbers
Take the proposal to raise the corporate tax rate from 21% to 28%. This would hurt businesses of all sizes, their employees and consumers. If the corporate tax rate were increased to 28%, Minnesota’s combined rate along with proposed federal tax increase would mean a combined top corporate tax rate higher than in any other country in the industrialized world.
The fact is, many Minnesota small and mid-sized businesses that would be hurt during a time of economic recovery. In total, this tax hike would hit more than 28,000 Minnesota employers, including 20,000 small businesses with fewer than 500 employees. Many of these businesses are just now beginning to get back on their feet. Sudden and substantial tax hikes are one sure way to stop their recovery’s momentum dead in its tracks.
Why it matters to Minnesota employers
Experience shows that the damage from higher corporate tax rates will be borne overwhelmingly by workers, who will see lower wages and fewer jobs. And all Minnesotans, as consumers, can expect to see higher prices as companies are forced to pass along the cost of these increased taxes.
These tax hikes are not just on businesses. They also threaten investment in Minnesota startups and growing businesses. The president’s plan essentially doubles the tax rate on capital gains, hitting approximately two-thirds of capital investment in the United States. For some Minnesota investors the combined state and federal tax rate would exceed 50%. If you’re saving for retirement, to buy a home, or for your kids’ college education, you will feel the pinch.
Adding further to the burden, the president’s proposal would levy a much higher tax burden on the transfer of assets of family-owned businesses at death. This would threaten the ability of the next generation of Minnesotans to keep those family-owned grocery stores, restaurants, auto body shops, construction companies and farms up and running.
Bottom line: raising taxes now will stop the recovery in its tracks. These tax increases aren’t pro-growth or pro-job policy. They aren’t part of the recipe for recovery. Hard-working Minnesotans – and all Americans – deserve better.
What can you do?
Minnesota's policymakers in D.C. need to know that keeping the corporate tax rates where they are will help Minnesota businesses can prosper and create the growth and jobs our state needs to keep this recovery going. We urge you to join our efforts by asking Representatives Craig and Phillips, as well as Senators Klobuchar and Smith to oppose raising the taxes on your business. Click here or the link below to reach out to these lawmakers today; your voice makes a difference!