Businesses Contribute to Strong Budget Forecast, Say There's No Need to Raise Taxes

ST. PAUL, Minn., Nov. 30 /PRNewswire/ -- Businesses are leading the state's economic recovery as underscored by today's budget forecast, said David Olson, Minnesota Chamber of Commerce president. It's all the more reason why the state should hold the line on new spending.

"The state treasury's bottom line has improved significantly, primarily due to increased revenues," Olson said. "Higher than expected corporate income taxes are a major contributor. This is not the time to raise taxes on business just when we're starting to see a turnaround in the economy."

State Finance Commissioner Peggy Ingison and State Economist Tom Stinson announced this morning a projected surplus of $701 million for FY 2006-07. The entire amount is dedicated under current law to pay back education funding shifts. In addition, the unallocated FY 2005 surplus of $317 million was deposited in the tax-relief account, and its use will likely be debated by the Legislature.

Two tax-relief measures are high on the priority of Minnesota Chamber members, Olson said: converting the capital equipment refund program to an up- front exemption and speeding up phase-in of the sales-only apportionment formula.

Polling among Minnesota Chamber members also shows a strong desire that any surplus funds be used to reverse the shifts that were used to balance previous budgets, reduce state taxes and replenish the reserve.

The FY 2006-07 projected revenues are up nearly $700 million from the end- of-session estimates. Corporate income taxes represent the largest percentage increase -- up almost 11 percent or $165 million. Projected corporate tax collections were reduced by about $232 million due to a court case involving Hutchinson Technology Inc. The ruling requires the state to pay off multiple years' worth of refund claims due to companies. Without the court decision, corporate income tax revenue was up about $400 million over previous estimates.

"This is just another indication that businesses are contributing in a big way to the state's economic recovery," Olson said.

Noteworthy to the business agenda, Olson said, is that the FY 2008-09 forecast shows a positive structural balance even after accounting for inflation and a potential transfer of the motor vehicle sales tax (MVST) revenue from the general fund to a dedicated transportation fund. If voters approve the amendment in the 2006 general election, the transfer would be phased in over five years beginning in 2007. The Minnesota Chamber is part of a broad-based coalition supporting the amendment.

Some groups have raised concerns that the amendment, if passed, will produce a hole in the general fund and thus shortchange other programs or services. "This budget forecast should put that issue to rest," Olson said.

The Minnesota Chamber of Commerce is the state's largest business organization, representing 2,600 businesses on state public policy and regulatory issues.