Taxes, Regulations and Killing Jobs

You've put your life savings into a small business that gives you a living and supports loyal employees and your community.  You love your company and want to keep your employees, but you have to deal with regulations and reporting about health care, employee benefits and retirement plans, State and Federal Unemployment Insurance Tax, Workers’ Compensation Insurance, FICA, sales and use tax, Dodd-Frank (now more than three million words in the Federal Register—or more than 3,500 11-inch-high pages), Sarbanes-Oxley, OSHA, SEC, Health Inspections, 1099 Forms, I-9 employment eligibility verification, state and local zoning and permitting, licensing, environmental and waste stream reporting, and even MPCA Industrial Storm water regulations.

Whew, its wearying just to find and list this small sampling of all the regulations. In total, regulation compliance sets a vary high bar of costs before you can even make your first dollar. Then you have to add on IRS, state, and local taxes and the myriad of rules with high costs of compliance (an example is $100,000 for a $2.5 million company, see below), before even paying the tax itself.

There are many business leaders that are warning our state and federal governments that they are hostile to business, and to its consequnces.  Hostility to businesses is a job killer.

3M chief warns Obama over business regulation

February 27 2011 Mr Buckley, who has run the diversified manufacturer [3M] since 2005, said: “There is a sense among companies that this is a difficult place to do business. It is about regulation, taxation, seemingly anti-business policies in Washington, attitudes towards science.”

He added: “Politicians forget that business has choice. We’re not indentured servants and we will do business where it’s good and friendly. If it’s hostile, incrementally, things will slip away. We’ve got a real choice between manufacturing in Canada and Mexico – which tend to be pro-business – or America.”

True Job Creators Need a Voice  By Bernie Marcus

I worked hard to make my own small company into a big one but I never could have succeeded if I had faced the avalanche of impediments that our current government hurls down upon this generation of entrepreneurs. The White House's job creation strategy is to threaten higher taxes on anyone making more than two hundred thousand dollars a year and to appoint yet another council on jobs. Does anyone really believe this will create the jobs this country needs?
Overregulation, unfair taxes, and new mandates, like the controversial healthcare bill, are choking these job-creating businesses before they can get off the ground. The President's State of the Union Address included calls to increase trade and cut corporate taxes, all things that help big businesses alright, but do little to help the small enterprises and start-ups that are the engines of economic growth. They need relief from the alphabet soup of regulations that stifles them and therefore chokes hiring.

Taxes do matter to businesses Article by: DOUG BAKER

Recently a retired business leader offered his opinion on these pages that increasing personal income taxes has no impact on business decisions or economic growth ("The governor's budget plan won't send businesses scurrying," June 9).

I have two reactions to that point of view: First, many in the business community strongly disagree -- and second, focusing on revenue generation misses the point and delays action on the more important issue -- unsustainable increases in government spending.

It's no secret that Minnesota always has been a high-tax state. An April 2010 report from the Itasca Project, which highlighted our region's strengths and weaknesses, identified Minnesota's uncompetitive tax structure as one of the main barriers to job creation.
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Our global competitors and the majority of U.S. states -- led by a number of prominent Democrat governors -- are moving toward lowering taxes, prioritizing government spending and building a more supportive business environment in order to attract jobs.

Small Businesses Speak Out Against Tax System

March 14, 2005 -- America's tax system hurts small businesses and deters would-be entrepreneurs, researchers and business owners told President Bush's Advisory Panel on Federal Tax Reform Tuesday.

"We have heard two strong messages: compliance costs and predictability," said Connie Mack, the chairman of the 9-person Advisory Panel and former Florida Senator.

Small businesses, said the senator, are disproportionately hurt by the complexity of the current tax system, most notably because of the enormous costs required to comply with the Internal Revenue Services. According to David Hurley, the owner of Landmark Engineering and one of the persons who addressed the panel, a company with $5 million of revenue spends the same on compliance as a company with $2.5 million: roughly $100,000.

When it comes to attracting businesses and jobs, corporate relocation firm Ecodev believes Minnesota can do better. January 21, 2011

Q: Why do you think the state [Minnesota] isn’t as strong as others like Nebraska and Texas?
» There’s a philosophical difference. In Minnesota, we just don’t have the mentality of investing in business, we think money should go to other programs. I’ve been in business here for nearly 30 years, and it’s always been that way. What we need to do is lower taxes across the board—business taxes are crippling here—and invest in businesses. Some people feel like it’s not right to put money into so-called “rich” companies, but the fact is that the state receives the money back, through payroll taxes, property tax, income tax.

Davids of the Dakotas worry Goliath Minnesota

January 21, 2011 The Washington, D.C.-based Tax Foundation confirms Republican tax claims. It annually looks at how states tax businesses, and the latest rankings show Minnesota in 43rd place. South Dakota has the best business tax climate, the Tax Foundation says, with North Dakota No. 20. Minnesota's other two neighbors, Iowa and Wisconsin, rank close to its position.

South Dakota and North Dakota economic deployment leaders said their states do things much like Minnesota Republicans want in Minnesota, such as giving businesses a stable environment.

Executive Director Bryan Hisel of the Mitchell, S.D., Area Development Corporation said consistency in business-related policies, such as taxes, is vital.

Marvin's John Kirchner explained why the firm expanded to North Dakota in the last several years: "The regulatory and tax climate in North Dakota ... tend to be more friendly toward the business."

Then if the tax and regulations aren't enough of a road block, you can have the federal government throw in legal problems for your efforts to locate in the best area for your economic development.

Boeing Labor Battle Is Poised to Go Before Judge

June 13, 2011  Barring a last-minute settlement, lawyers for the National Labor Relations Board will begin arguing before a Seattle judge on Tuesday that Boeing broke the law by building a new, nonunion production line in South Carolina instead of expanding its unionized operations in Washington State.

The case has stirred a political firestorm. Republicans have joined business leaders in accusing the labor board of trying to sabotage right-to-work states as well as the fundamental right of corporate managers to decide how and where to run their businesses.

The conclusion is once again, policy has consequences, bad policy hurts a lot of people.  Governor Mark Dayton's desire to increase taxes, increase spending, refusal to negotiate and to compromise in any fashion is ever more evidence of his addiction to bad policy.