Business groups like Pawlenty's tax cut plans

Gov. Pawlenty spoke before two local chambers of commerce today. He made the case that he's been making since his State of the State a few weeks ago -- cutting taxes on business will help create jobs.

"Minnesota has a business and jobs climate that doesn't fare very well as compared to our competitors," Pawlenty said.

Pawlenty outlined his budget proposal to about 50 people who were attending a luncheon hosted by the Burnsville Chamber of Commerce. He said the state can't afford the expected growth in health and human services programs. He urged greater accountability in education and local government.

But the comments that received the warmest response were about his proposed business tax cuts.

"There are a whole bunch of people in the next six months whose job it is at the Capitol to get some more money for programs, many of which are good. But we also have to make sure that people hear from folks that are paying the bill, and many of the folks in this room pay the bill," said Pawlenty.

The governor is proposing a cut in the corporate tax, a sales tax exemption for equipment purchases, and a tax credit for small businesses that reinvest in their companies in 2009.

As Pawlenty outlined his tax cut package, Dave Edmunds nodded in approval. Edmunds works for Kraemer Mining and Materials in Burnsville.

"Unless we have those incentives and those tax cuts, we won't be able to provide the extra jobs to keep the economy going."

Edmunds said his company, which mines limestone, has faced difficulties as the commercial and residential construction sector has struggled. He said tax cuts would help them weather the storm.

"If we are incented to spend money to improve our process, which we will, it's going to accelerate when we're going to spend money," said Edmunds. "The money we spend will be spent locally, so it will generate money for a local supplier."

Darlene Miller was sitting next to Edmunds during Pawlenty's speech. Miller is president and CEO of Permac Industries, which employs 42 people at its Burnsville facility, where they manufacture precision parts for equipment.

Miller said the economic downturn has forced her to keep some open positions unfilled, but she said she is hiring qualified machinists. Miller said cutting business taxes would help her hire more people.

"I think it's absolutely critical that he look at business and provide the tax cuts, because the small businesses are the ones who are generating the jobs," said Miller. "Unless we have those incentives and those tax cuts, we won't be able to provide the extra jobs to keep the economy going. It's not just a short-term fix. It's a long-term fix."

After his speech to the Burnsville Chamber, Pawlenty gave similar remarks to a meeting of the Rochester Chamber of Commerce in St. Paul.

After that speech, Jeff Allman, who owns a company that designs new buildings and develops old buildings, said he is pleased Pawlenty wants to make state government more accountable.

"We're constantly faced with things like, 'Do we get value? Do we hire one more? Do we hire one less?' We're confronted with that every day," said Allman. "And I'm not sure government and some of these big agencies like education, like social services, have to face and sharpen their pencils just like small business does."

In all, Pawlenty's tax cuts would reduce revenue by $268 million over the next two years. But at a time when the state is making massive cuts to services, some state lawmakers may be reluctant to adopt the tax cuts.

DFL House Speaker Margaret Anderson Kelliher said she supports efforts to keep Minnesota's economy competitive. But she has concerns that there is no accountability.

"This spending would have no oversight over it, and that is a concern right now in the times that we are in," said Kelliher. "If we're going to do something like this, then we need to look at what the real barriers are in the business climate."

Kelliher did signal some support for a sales tax exemption for equipment purchases, but expressed greater skepticism about cutting the corporate tax rate.

She said nearly half the businesses that pay corporate income taxes in Minnesota are headquartered outside of Minnesota. She said she's concerned that those businesses may be less likely to reinvest their savings in Minnesota.

The governor will continue speaking to business groups to gain support for this budget plan as the weeks go on.

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