Several days ago, Red Wing Shoes – one of the top employers in our area – announced it was putting the brakes on constructing a $20 million distribution center in Red Wing over concerns with a new warehousing tax.
The new law would impose a 6.875 percent tax on general product warehousing and storage at bulk shipping terminals, such as railroads and commercial docks. It also impacts border communities as businesses can alter their behavior by utilizing storage and repair services in neighboring states.
Because this unnecessary and ineffective warehousing tax is causing diminished investment in Minnesota and lost jobs, I held a press conference in St. Paul recently with other lawmakers and several concerned employers urging Governor Mark Dayton to call a special legislative session in order to repeal this unneeded law. When entrepreneurs tell me they are forgoing multi-million dollar investment projects because of this tax, then Minnesota is clearly facing a problem and this legislature and our governor needs to take quick action.
Stephen Lawrence, who is the President and CEO of Lawrence Transportation Services in Red Wing, joined me at the press conference and perhaps said it best: “The tax itself picks winners and losers within the same industry. The legislative intent was to raise revenue for the State of Minnesota. I don’t see how that can happen as once you understand supply chain management this bill will end up being counterproductive, will hurt the warehousing business, create fewer jobs instead of more jobs, and be detrimental to the State and consumers of goods within its borders.”
Due to the negative reaction from the business community over the last minute insertion of the warehousing tax provision into the omnibus tax bill, speculation has already begun that Democratic legislative leadership will revisit the issue during the 2014 session. The effective date of the warehousing tax is April 1, 2014, but Minnesota’s companies want certainty that this tax is going to disappear, and calling a special session in order to repeal the tax would give them that assurance.
Within a budget that now contains nearly $3 billion in new spending, it should not be difficult to reduce spending by $95 million in order to eliminate the tax. The fact that the legislature decided to have the law take effect in April 2014 puts the warehousing industry in a state of flux until this process is sorted out.
This law will also impact every hardworking taxpayer in Minnesota because when this business tax is implemented, the costs will be passed back to the consumer.
The Governor's staff suggested my plan was a stunt and the Democrats have stated that there is plenty of time to fix this since it does not go into effect until April. I can only assume that those people have no business experience whatsoever and have never had to formulate a business plan. Businesses do not plan a month at a time. They complete one, three, five and ten year plans so that they can be prepared for the future.
These are businesses that employ the people of this community. All across the state, business has been put on hold and jobs have been lost. It’s my hope that Governor Dayton will call a special session to repeal this terrible legislation and send a signal to the business community that it’s safe to invest in their companies and create jobs once again.