Dayton: tax credit for hiring unemployed workers, tax for online purchases

Gov. Mark Dayton proposes a package of investments and tax policy changes that he claims will create thousands of jobs for Minnesotans.

Dayton outlined several initiatives Wednesday, including a $35 million plan to give businesses tax breaks when they hire unemployed workers.

Despite recent improvements in the state economy, there are still 175,000 Minnesotans who are unemployed, said Dayton, who gathered DFL legislators to introduce the jobs plan.

"We have returning Iraq and Afghan war veterans who can't find jobs, and we have thousands of young people graduating from our colleges and universities who are also looking for work," Dayton said. "So, this program is targeted toward putting them back to work productively in Minnesota."

Dayton wants to reward businesses this year with a $3,000 tax credit every time they hire an unemployed person, a veteran or a recent graduate. The proposed credit would drop to $1,500 for the first six months of 2013, and then end.

The governor estimated the credit would create more than 20,000 private sector jobs. He said the cost would be covered in large part from other tax policy changes, including closing what he called a corporate loophole that allows companies to exempt some of the money they earn overseas from state taxes.

"The foreign operating credit and others ...should be more than enough," Dayton said. "If we just partially restricted that, we'd make the money."

Dayton also proposes to raise about $3.5 million a year in new sales tax revenue by taxing online purchases from out-of-state retailers. Senate Minority Leader Tom Bakk said the Internet sales tax would create a level playing field for all retail businesses.

"The number of Minnesotans that are shopping online and making purchases online is increasing dramatically," said Bakk, DFL-Cook. "And as more and more of those sales go outside of this state, our Minnesota employers with bricks and mortar here are at a huge competitive disadvantage with online retailers that don't have stores here."

Bakk has tried before to pass a similar tax change, but he didn't receive any Republican support. Online retail giant Amazon.com has also opposed such taxes in several states.

Still, Dayton said the tide could be turning on the issue throughout the nation.

"Lincoln Chafee, the governor of Rhode Island is spearheading this and really recruiting other states," Dayton said. "There's strength in numbers. I think the more states that join the group that are acting this way, the less leverage Amazon is going to have."

Dayton said he hasn't vetted his proposal with Republican leaders. House Speaker Kurt Zellers said he concurred with the governor's plan to create more jobs, but disagreed with an approach that spends more money.

"The plan fails to address critical reforms businesses have told us they need to create jobs such as reducing the regulatory burden and creating a more competitive tax climate," said Zellers, R-Maple Grove. "His efforts to fund job placement will be in vain without new and expanding businesses."

Charlie Weaver, executive director of the Minnesota Business Partnership, said he also supports Dayton's job creation goal, but not his plan to pay for the tax credits. Weaver disagreed with Dayton's characterization of the foreign operating credit as a loophole. He said eliminating it would penalize some of the state's most successful companies.

"The Legislature is not going to pass a tax increase. They just won't," Weaver said. "They're not going to punish our best companies. But given the surplus, there may be opportunities for some of these pieces to find their way into law, if you can find a different revenue source. I think certainly some of these things are good ideas."

Another piece of the Dayton plan would boost funding for the Minnesota Investment Fund by $10 million. The program helps lure businesses to the state and helps existing businesses expand. The governor also predicts thousands of construction jobs will come from a bonding bill that he plans to release next week. He said the bill will propose borrowing for $775 million worth of public works building projects throughout the state.

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