Duluth Businesses Join Fight Against Dayton's Tax Proposal

By KBJR News 1

March 1, 2013 Updated Mar 1, 2013 at 12:07 PM CDT

Minnesota business leaders aren't being shy about their opposition to a business-to-business tax included in Governor Mark Dayton's proposed budget.

Many say it would make Minnesota products and services less competitive and drive jobs out of the state.

Minnesota business leaders say get ready, because if Governor Mark Dayton's budget gets passed the price of every consumer good will go up.

"Prices will go up for the consumer, and that's the hardest thing," says Jay Ott, owner of AdMax.

The issue that has small business owners so upset is a proposed tax on all business-to-business services.

So when Ott's advertising firm closes a deal, they'll have to tack on an extra expense.

"Every invoice that we have will have another 5.5% or 6.5% tax on it."

Ott says he fears that if this tax passes his clients--mostly small businesses--will cut back on advertising, go to another state, or try and do everything internally.

Businesses like How Sweet It Is Bakery in Duluth says it will cut back on advertising if the tax goes through.

Now when bakery owner, Eileen Brown, gets her advertising, taxes, legal, or any other services done, she'll be paying more. It's an extra expense she says she will have to pass along to her customers.

"Our costs are going to rise, which we'll have to pass on to the consumer and it's not going to do any good for anybody," says Brown.

Dayton says he is just trying to balance the tax system.

"I'm not out to raise anybodies taxes, I'm out to do what's right for Minnesota," Dayton said at his budget address back in January.

But these Duluthians say by taxing small business, the state will lose out on revenue opportunities that come from growth and profit.

"Cutting back is going to hurt our business, and we really do see an impact," says Brown.

One of the biggest fears for business owners in Duluth and across Minnesota is that customers will follow the cash, and with no taxes on business to business services in Wisconsin, savings could be right across the bridge.

"They are reaching out to small business, they are saying, what can we do to help, they are not passing more taxes on to the small business," says Ott.

Potentially driving business away for some, while forcing cutbacks for others.

"We have thirteen employees. We may have to let some go. If our costs go up, we have to make money or we're done," says Brown.

The Governor argues that other provisions within his proposed budget, such as the lower corporate tax rate could spur growth.

A budget is scheduled to be approved by April 14th.

Courtney Godfrey
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