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 would be paid for by workers and families through lost jobs and lower wages and would impact thousands of small businesses.
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 a proposed federal tax increase, would mean a combined top corporate tax rate higher than in any other country in the industrialized world.
On top of that, companies headquartered in Minnesota would face higher U.S. taxes on global income.
In total, this tax hike would hit 28,295 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.
Experience shows that the damage from higher corporate tax rates would be borne overwhelmingly by workers, who will see lower wages and fewer jobs. And all Minnesotans, as consumers, could expect to see higher prices as companies are forced to pass along the cost of these increased taxes.
Keep in mind, these tax hikes would not just be on businesses. They also would threaten investment in Minnesota startups and growing businesses. The president’s plan would essentially double 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’d 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 would 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. I encourage my fellow Minnesotans to join me in contacting their representatives and telling them not to raise taxes that will hurt small businesses, workers and families.
Doug Loon is president of the Minnesota Chamber of Commerce.
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