The Minnesota Chamber of Commerce is leading a push across the state to encourage the Legislature to make the tax climate for businesses more competitive.

The push has become the organization’s top legislative priority of this year.

“If you look at Minnesota, everybody agrees the economy is pretty good right now,” said Jim Pumarlo, communications director with the Minnesota Chamber of Commerce. “Minnesota is getting a lot of good reports … but in tax policy we’re still ranking the worst in the country.”

The organization wants to improve competitiveness for small and midsize businesses by reducing the tax burden on their business income that is passed through their personal income tax returns. It also hopes to reduce the corporate tax rate, enhance research and development credit and reduce the estate tax.

Pumarlo said 92 percent of Minnesota companies pay their taxes through their personal income tax return. He said business owners should not have to be taxed on income that is directly invested back into their business.

“It’s basically another ball we have to juggle,” said Charlie Newell, president of Minnesota Freezer Warehouse in Albert Lea.

Tom Sherman, owner of Usem Inc., said taxes for his car dealership have increased by about 45 percent to last three years, and he said the increase amounts to a job position.

“It’s also about fairness,” Sherman said. “Because my effective tax rate as a small business owner is substantially higher than the effective tax rate of someone who works for a public company.”

Sherman also said the Minnesota tax system, especially for businesses, is overly complex, and he said he pays much more than average residents and business people in neighboring states.

Austin Area Chamber of Commerce Executive Director Sandy Forstner said the system of taxing business people at a higher rate is handicapping them and making it harder for them to invest in their business by adding staff, new equipment or expanding.

“Shouldn’t you be given some credit for trying to save up some funds to really invest in your businesses?” Forstner said.

Newell said if he wants to add staff and equipment at his warehouse business, he has to look at the tax implications.

“We feel at times it is a disadvantage compared to how other entities are classified on the tax code,” Newell said.

Bill Blazar, interim president of the Minnesota chamber, agreed.

“They’re in effect discouraged from reinvesting in their company,” Blazar said.

Randy Kehr, executive director of the Albert Lea-Freeborn County Chamber of Commerce said 70 percent of jobs in Minnesota are created by companies that are already in business in the state.

“We don’t need an additional road block,” Kehr said.

Pumarlo said a survey conducted by the Minnesota Chamber last summer of the business community throughout the state identified that 62 percent of responders said the tax burden is one of the two biggest burdens to creating jobs in Minnesota.

The state chamber supports investing a portion of the state surplus to business tax relief.

“Put that money in the hands of businesses so they can hire more people,” Pumarlo said. “That money is going back into the economy.”

Newell said this would cause a positive ripple effect throughout the state.

Kehr noted that businesses agree they need to pay their fair share, but noted it needs to be fair and not inhibit growth. Businesses represent 13 percent of the taxable property but are paying 32 percent of the overall taxes, he said.

“Everybody believes you have to pay your way, but it shouldn’t be unduly spread on the backs of business,” he said.

Some of the other chamber priorities include the following:

Education and workforce

With Baby Boomers retiring around the state, there is an issue with finding enough qualified workers to fill open positions.

Pumarlo said the chamber supports accelerated workforce training and apprenticeship programs, helping high school students earn college credit before they graduate and streamlining testing.

Kehr said workforce is one of the largest issues the local business community faces. While there are open jobs, there are not enough trained, qualified people to fill those positions.

Health care

Pumarlo said the chamber supports the elimination of the employer assessment for the Minnesota Comprehensive Health Association.

It also supports reforms to strengthen the transparency and oversight of MNsure and making sure employers have as many options as possible for providing health insurance to employees.

Transportation

Pumarlo said the chamber members have said the transportation system is serving them well, but the state needs to make sure to maintain it. They support a transportation funding package that is strategic and sustained.

He said the chamber supports passing a 10-year funding plan that focus first on efficiencies and use of current resources. If additional funding is needed, the Legislature should look to the general fund and then new user fee models.

Labor and management

The chamber supports the repeal of an automatic inflation index on the minimum wage rate.

“We don’t think any government program should be on autopilot,” Pumarlo said.

—Jason Schoonover contributed to this report.