The Cost of Business in Minnesota

Cost-of-Business-in-MNThe following was written by Brianna Harrington of Intertech.

Governor Mark Dayton’s administration claims its new tax proposals could raise more than $2 billion in new revenue in the upcoming budget cycle.

While the tax could help to eliminate the 1.1 billion dollar deficit, it assumes businesses can financially shoulder the burden of a compounding tax, which makes them less competitive today and moving forward.

Last Friday, Dave Brenner, a senior manager at Intertech, met with legislators Sen. Roger Chamberlain, Rep. Matt Dean, and Rep. Linda Runbeck and 15 other concerned business members at a round-table discussion in Vadnais Heights to discuss the proposed tax increases.

The businesses represented ranged from small mom and pop shops to large enterprises with clients from around the world. Unsurprisingly, many of the business owners raised the same short-term and long-term concerns.

A small trucking company shared its frustration in adding to the financial gridlock because of an uncertain future.   To grow his business, he needs to purchase another truck, but at a cost of over $100,000 he has to hold off until he knows how he’ll pay for the additional taxes.

Another company expressed that a 5.5% cost increase with their already thin profit margins will completely curtail their ability to pay down operating loans, invest in new products, and will make their long-term competitiveness unobtainable.

A local businessman explained if the law passes he would be faced with the tough decision of having to cut their workforce, move employees to part-time, or move their location. With plenty of bordering (and non-bordering) states already reaching out to businesses unwilling or unable to take on the new tax burden, he expects many companies to be in the same position.

Issues were also raised on the claims corporate taxes will go down. While large corporations may see a decrease, the majority of businesses, companies that are filed under sub-chapter S (as well as LLC’s), will see a 25% increase in taxes (from 8% to 10%).

A native Minnesotan shared that he has already had to co-locate his business due to taxes. He currently lives in MN, largely for personal ties, while his offices are located in Hudson. However, with the tax hikes on the horizon he feels he’ll have no choice but to completely relocate to Wisconsin. “It just makes more financial sense.”

Finally, the MN business-to-business tax favors large companies able to offer in-house services such as accounting, legal, or design; yet another disadvantage to budding businesses.

I agree with Gov. Dayton, that, “No one likes paying taxes.” but the compounding cost of the taxes proposed, creates an almost hostile environment for businesses to flourish in Minnesota. Add that to the lack-luster appeal for new businesses and the potential brain drain to our vibrant business community and you’re left with a devastating long-term impact.

With Training, Take the Long View – 3rd and Final in the Series

Upside-DownAs I described in my previous post, I’m taking issue with the article: “Who Can Fix the ‘Middle-Skills’ Gap?” by Thomas Kochan, David Finegold and Paul Osterman, which appeared in the December 2012 issue of Harvard Business Review. The authors simply accept at face value the notion that individual employers should not train employees because those employees might leave. I disagree.

In fact, I believe the best way to retain employees is to continually offer them great training. At our annual senior leadership offsite planning retreat, we always have an agenda item around how we ensure job satisfaction for our associates. We believe there are multiple components, including:

  • Stimulating, challenging work
  • Clear expectations
  • Continuous feedback
  • Unparalleled learning
  • Explicit career paths
  • Fair reward and recognition
  • Inclusive culture

I recently did a presentation to the leadership team of a local college on “programs or incentives to increase morale and productivity.” I explained that if the above components aren’t covered, no program or bonus system matters. Focus on the core blocking and tackling of creating satisfied/happy/productive employees!

Similar to training, professional certification makes some employers feel at-risk for losing talent (after their people become certified). There was a local, large firm who stopped incentivizing their employees to be certified because its management believed certification created opportunities for people to leave.

Here, too, I think it is short sighted. We pay for study materials, pay for the exam (pass or fail), and give a spot-bonus of $750 for each technical exam passed (for Microsoft, there are typically four exams in a certification so it’s $3K total). That investment in our people is small in comparison to the benefits we reap: extraordinarily loyal and satisfied employees who do great work! Our employees are happy, our customers are happy and Intertech thrives. It may sound simplistic, but it’s a formula that works!