The House Commerce and Consumer Protection Finance and Policy Committee held a hearing Thursday morning intended mainly to offer up a comparison of the economies in Minnesota and neighboring Wisconsin. But, as seems to happen more often than not in recent months, the discussion’s focus soon shifted to the business-to-business tax increases passed earlier this year by the Democratic majorities in the Legislature.
Committee chair Rep. Joe Atkins, DFL-Inver Grove Heights, said he’d convened the hearing to deal with what he thought were misconceptions about the performance of Wisconsin’s economy compared to Minnesota’s.
“It’s not about Wisconsin-bashing,” Atkins said. “But there seems to be… this exaggeration and propaganda that tends to occur.”
Atkins produced two testifiers to attest to the strength of the state economy. Appearing first was Myles Shaver, a professor at the University of Minnesota Carlson School of Management, who said he had moved to Minnesota to study the state’s cluster of major corporations. According to Shaver, both Minnesota and Wisconsin were home to nine Fortune 500 companies in the mid-1950s. In 2010, Minnesota’s number of Fortune 500 businesses had grown to 20, while Wisconsin’s had shrunk to nine.
Following Shaver’s testimony, Kim Babine of the Department of Employment and Economic Development (DEED) testified about a number of economic measures in which Minnesota routinely outranks its neighboring states — with some exceptions, owing largely to the economic boom in newly oil-rich North Dakota. When Babine finished her presentation, most of the questions that followed had little to do with the state’s economic ratings, focusing instead on the impact of new taxes, as well as the roles Gov. Mark Dayton and DEED have played in luring new business to the state.
Rep. Kelby Woodard, R-Belle Plaine, asked Babine about the administration’s attempts to recruit corporations to the state using tax incentives and public subsidies. Woodard and other Republicans on the committee made reference to recently approved deals with Baxter International Inc., an Illinois-based medical device manufacturer, and Shutterfly, the California online photography publisher, which Dayton personally visited earlier this month. Babine told the committee that Dayton typically only gets involved in helping land a company if the deal is nearly finalized, and the company wants assurances that the state is the right fit for its business.
“It’s kind of the final piece of the puzzle,” she said.
DEED has also played a substantial part in the negotiations with Baxter International and Shutterfly, and the administration is currently ironing out details to encourage the two companies to open new offices in Brooklyn Park and Shakopee, respectively.
“I often talk to small businesses in my district, about how they feel like they’re subsidizing Shutterfly coming into Minnesota by paying higher taxes,” Woodard said. “You’re picking winners and losers, and how does that effect the losers?”
In response, Babine said bringing in big corporations does not necessarily hurt the state’s smaller outlets, as “homegrown, smaller mom and pop shops” can often become part of the supply chain for bigger companies.
Several Republicans also asked Babine about how tax increases passed during the 2013 session might discourage new businesses from relocating to Minnesota or, worse, drive existing business to neighboring states. Rep. Greg Davids, R-Preston, said the series of business-to-business taxes that will apply to previously exempt services such as warehousing and business equipment repair would hurt businesses in his southeast corner of the state, which borders both Iowa and Wisconsin.
“I think we made your job a whole lot harder this year,” Davids told Babine, adding, about his district: “We are getting creamed. It is not good.”
Babine said the Legislature’s investments in education during the session would be an attractive feature to bring in corporations from out of state, arguing that the agency had not seen a drop-off in inquiries since the new taxes were passed.
“We know that taxes don’t tell the whole story,” Babine said. “Our business development team is busier than ever with companies wanting to do business in Minnesota.”