For Dayton and some business leaders, tensions bubble to the surface

At a St. Paul Chamber of Commerce meeting last week, Mayor Chris Coleman playfully noted the tension between Gov. Mark Dayton and business leaders as he introduced Tina Smith, the governor's chief of staff.

"For those of you that brought rotten or rotting tomatoes to throw at the governor," Coleman said, "don't throw them at Tina!"

Smith defended Dayton's budget, including his call for a new income tax on the top 2 percent of earners. She also thanked the businesspeople for their contributions to the state.

"We may not always agree, but the governor respects deeply your perspective," she said. Smith's cordial tone is one that some business leaders say the governor needs to take.

The issue could come up on Tuesday, when David Olson, president of the Minnesota Chamber of Commerce, plans to meet with top Dayton administration officials to discuss tension between the governor and business leaders.

Chamber officials accuse Dayton of misrepresenting Minnesota's business climate and dismissing their concerns about the repercussions of raising taxes on top earners.

They point to a speech Dayton delivered a couple of weeks ago to the chamber in which Dayton took the group to task for criticizing him as he beat back its arguments against tax increases.

"I believe that my budget presents a balanced approach in reducing old spending, increasing it in key areas like education and economic development and a fairer tax system," Dayton said. "I expect the chamber will oppose it. All I ask is that you oppose it with the facts."

Dayton went on to cite how taxes have been decreasing in Minnesota relative to other states, down from the eighth highest in 1996 to the 15th highest last year.

"Basically, we felt we were being scolded, we as business owners, and the chamber was being scolded for not agreeing with him," said Paul Huot of St. Paul-based Huot Manufacturing.

"There were eight of us sitting at our table, and three of them were ready to get up and walk out," said Huot, who was in the audience.

Olson said Huot and the people at his table were not alone.

"It was, 'You don't know what you're talking about; you don't have the facts,'" Olson said of the governor's speech. "People were embarrassed for him and they were furious."

For the first two years of Dayton's term, Olson said, business leaders had a good relationship with the governor. He cited their cooperation on efforts to speed up business permitting and seek education reform.

Olson said Dayton could have built on recent goodwill after his decision to drop the sales tax on services, an idea that many businesses opposed. Olson accused Dayton of instead berating businesses, which Olson said threatens jobs.

"What they're saying is the next time I make an investment decision, the next time I think about buying a piece of equipment, if I've got plants in other states, you know, these kinds of conversations will come into play in that decision," he said.

In an interview about Dayton's relationship with the business community, Smith, his chief of staff, said the governor is trying to work with businesses directly rather than cater to groups like the chamber.

"I think the governor is interested in making good public policy that moves Minnesota forward," she said. "I don't think he is too worried about what the business advocacy organizations are thinking or feeling."

Smith said she hopes Tuesday's meeting with chamber leaders will yield agreement that the Dayton administration is pursuing reform efforts to make government more efficient and that government spending in Minnesota is not increasing at out-of-control rates as some business groups claim.

"He believes strongly that there is just a lack of shared facts about what they business climate is in Minnesota and what the situation is in Minnesota," Smith said.

Olson said the chamber does not dispute the numbers the governor is using. But he suggested that there is more to the business climate than the statistics and that the governor should not be dismissive of business leaders' concerns.

"It's gotten to the point where we can't be scolded," Olson said. "We can't be talked down to everywhere he travels around the state and have our members just say, 'Well, isn't that wonderful.'"

Apart from tone, Olson said the biggest problem the chamber has with Dayton now is his call for higher taxes on top earners. The chamber claims it would hurt small businesses.

Dayton cites Department of Revenue analysis that just six in 100 small business owners would face higher income taxes under his plan.

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