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| Legislature passes $52 billion budget, avoids government shutdown |
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Late last week, the Legislature passed its final budget bills, averting a partial government shutdown. The final compromise contained a number of positive provisions for employers while avoiding many provisions that would hinder Minnesota's economic recovery.
Here's a look at some of the big accomplishments our policy team made at the Capitol this year:
- Lawmakers proposed billions in tax increases this session, despite large budget reserves and federal stimulus funds. Through the work of the Chamber and our allies, we provided much needed relief to the thousands of businesses that participated in the Paycheck Protection Program (PPP) loans. This was an important victory as our state was one of a few states that did not conform to federal tax treatment of forgivable Paycheck Protection Program (PPP) loans. Record-breaking grassroots initiatives helped secure $409 million for the 150,000 businesses who took these loans.
- Other provisions include reduction of business property tax levy and new election for pass-through entities. This is on top of successes in 2020 to fully conform with federal Section 179, allowing immediate equipment expensing, saving farmers and small businesses from retroactive tax increases and securing $208 million in tax relief.
- For years, lawmakers proposed extreme mandates on paid leave, scheduling, wage and others. Once again, the Chamber blocked these proposals, preventing a paid leave mandate equal to 58% of employee work days and saving businesses $2.2 billion and a .6% payroll tax increase.
For a topic-by-topic breakdown of everything that happened this session relating to Minnesota's business community, click here to view a free webinar from the Chamber's policy team. |
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| ISSUES IMPACTING THE BUSINESS COMMUNITY |
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TAXES
- The final tax bill included the Chamber's top priority of full conformity with federal tax law on PPP forgivable loans, preventing the $409 million state income tax hit for the over 150,000 businesses that received this federal lifeline in Minnesota.
- The bill was good news for employers and employees as it provided $738 million in tax relief in FY 2022/23 biennium and did NOT contain any tax increases.
- The bill contained other important tax reforms including a new option for owners of pass-through entities to pay taxes at the entity level which will result in a lower federal tax burden as will not have the $10,000 federal cap on their state and local taxes (SALT) for their state business income taxes.
- The Minnesota Department of Revenue has provided additional information for taxpayers regarding tax year 2020 filings due to the recent tax bill.
- The Chamber defeated over $1 billion in new permanent tax increases including:
- New 5th tier individual income tax of 11.15% starting at $1 million married filing joint ($563 million tax increase FY 2022/23). Minnesota would have 2nd highest rate just behind California. This would harm many pass-through business entities and talent recruitment and retention.
- Corporate tax rate increase to 10.8% from current 9.8% impacting all corporate taxpayers making Minnesota 2nd highest in the nation.
- Corporate tax increase of $453 million FY 2022/23 with taxation of foreign earnings and Sec. 965 repatriated income.
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HEALTH CARE
- A number of Chamber health care priorities passed during the special session including health insurance mandate review and reinsurance.
- Health insurance mandate review requires a cost/benefit analysis of any new health insurance mandates. This will provide more context to policymakers on how new mandates add to health insurance costs for employers and employees.
- Reinsurance was extended (at 75% of previous years) for 2022.
- The Department of Commerce will apply for new waiver to continue in 2023 and beyond.
- Reinsurance has been critical in stabilizing and reducing costs in the individual market. It has lowered premiums by roughly 20% for those individuals, entrepreneurs and small businesses that rely on the coverage they buy in the individual market. And current estimates indicate that premiums would rise 25% or more if reinsurance were to go away.
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WORKPLACE MANAGEMENT
- While the House previously passed onerous workplace mandates on employers, the Senate focused its efforts on facilitating and accelerating economic recovery through appropriations to programs that seek to address workforce development and eliminate barriers to workforce entry and participation.
- Over-reaching “one-size-fits-all” state mandates disrupt the positive relationship between most employers and employees, unnecessarily inhibit creative workplace solutions and interfere in the operations of workplaces that are already heavily regulated.
- Once again, the Chamber blocked these proposals, preventing a paid leave mandate equal to 58% of employee work days and saving businesses $2.2 billion and a .6% payroll tax increase.
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TRANSPORTATION
- Funding for a freight optimization tool passed as part of the final agreement.
- This helps both the public and private sectors maximize the movement of freight and investment of freight infrastructure around the state.
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WORKFORCE DEVELOPMENT
- Minnesota is facing a workforce shortage in nearly every sector of the economy, while record levels of Minnesotans claim unemployment insurance.
- The immediate needs of a post-COVID-19 crisis response – rapid rehiring, nimble retraining and swift upskilling – are at the forefront of workforce development discussions.
- Employers are doing their part: offering increased wages, signing bonuses, innovative benefit options and flexible work arrangements, as well as training and professional development.
- The Chamber continues to stress the need for initiatives that incentivize workforce participation, increase employer engagement in the training of workers and supporting policies that ensure student and career readiness throughout the education and workforce development pipeline.
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ENERGY AND SUSTAINABILITY
- Legislators agreed on a package of energy policy proposals intended to facilitate the transition to cleaner energy across the economy.
- Included in the final agreement were the Natural Gas Innovation Act, Minnesota Efficiency Technology Accelerator and other new programs to support broad carbon reduction efforts.
- The Chamber worked hard to ensure these programs had reasonable spending limits, a clear policy focus and proper oversight.
- We successfully argued against massive new utility-customer funded spending programs that would not have provided clear value to our state.
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TELECOM
- The Legislature authorized $70 million total for the state broadband development program in 2022 and 2023.
- This is the largest one-time investment and matches the largest single-year investment ($35 million in 2016) in the program’s history.
- Combined with billions in existing and new broadband funding authorized by the federal government, this should make a significant dent in Minnesota’s broadband access gap.
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