Tim Walz's tax increases caused conflicts with the Minnesota economy

Six years before Tim Walz was named Kamala Harris's vice presidential running mate, he was busy running for governor of Minnesota. Shortly before Election Day, Walz met with dozens of business leaders at a luxury hotel on the shores of Gull Lake.

Eric Gibson, then president of Ultra Machining Company, recalled asking Walz whether the Democrat believed high corporate and state taxes were hurting staff.

“We don't tax people,” Walz replied, in response to Gibson. “We tax corporations.”

For Geoff Baker, “it was a bit of an 'oh crap' moment,” he recalled to CNBC, confirming Gibson's report. “That's not what I wanted to hear,” said Baker, president of McFarland Truck Lines.

Minnesota currently taxes corporate income at 9.8%. The bipartisan Tax Foundation says that is the very best corporate tax rate of any state within the country.

Walz's approach to corporate and other business-related taxes has not modified noticeably since that meeting at Gull Lake. Especially not because the Democrats won a three-way victory. majority in 2022 and takes control of the state's House of Representatives, Senate and governor's office.

“It was tense,” said Douglas Loon, president and CEO of the Minnesota Chamber of Commerce, of the trade association's relationship with Walz. The chamber has over 6,000 members, including Fortune 500 giants reminiscent of Goal, UnitedHealth Group And Best buy.

CNBC spoke to just about half a dozen people accustomed to the ability struggles and reviewed letters to the governor and disclosure reports on lobbying on the state level.

They show that Walz's political struggles were centered around a standard theme: Walz supported higher taxes on the wealthy and corporations, and business leaders resisted.

One of the fights was over a further tax of 1% This applies to passive investment income over $1 million. Walz also signed Legislation introducing a tax on global intangible low-taxed income[GILTI].

Another recent tax for the wealthy, the Walz signs law limits the usual and itemized tax deduction for households with gross incomes over $220,000.

But while Walz was often willing to fulfill with business interests and hearken to their arguments, the governor and his Democratic Party colleagues in power rarely gave in.

The meeting with Walz left business associations and executives with the impression that the two-term governor was not at all times desirous about compromise.

As Harris prepares to release her first economic policy plans later this week, investors and business owners can be watching closely to see whether Walz's approach to tax laws is reflected within the priorities of a possible Harris administration.

One of the largest recent conflicts between Walz and the state's business community has revolved around a brand new payroll tax to fund universal paid family and medical leave for Minnesotans.

This bill, Walz signed The law will come into force in 2023 and can take effect in 2026. It provides for a payroll tax of 0.7% on employees' wages, with employers and employees sharing the tax payment, in response to the Center for Tax Policy.

At the time, state regulators said the payroll tax could ultimately rise to 0.88%, a figure often cited by opponents of the tax. But supporters believed a brand new payroll tax could raise greater than $300 million to fund the paid family leave plan, in response to the Minnesota reformer.

As a part of the extraordinary lobbying against the law, meetings were also held with the governor himself.

At least eight representatives from the Minnesota Chamber of Commerce, including Loon, met with the governor last yr in his Capitol office in St. Paul, Minnesota, to oppose the bill before the governor signed it, in response to Baker, who was present on the meeting and whose company is a member of the pro-business lobbying group.

“We were very concerned about the corporate benefit regulations,” including the impact of the payroll tax on businesses, Baker said. They also tried to encourage Walz to push for more tax reforms to get the state out of the highest tier of corporate taxes, Baker explained.

Even though Walz listened to them, the governor ended up signing the bill anyway, and the state stays the state with the very best corporate taxes.

For a special perspective on Walz and taxes, the Harris campaign referred CNBC to Bill George, a Minnesota businessman and former CEO of Medtronic.

George said Walz was willing to compromise with the economy.

One example he recalled was a recently passed bill that may have mandated a minimum wage in Minnesota. The bill passed the state legislature, but ride-hailing giants Uber and Lyft threatened to due to this fact reduce their presence within the state.

Walz vetoed the bill in 2023. He later signed a separate bill to raise Paying rideshare drivers.

George said Minnesota is an important place for him to do business, but acknowledged that taxes are high in some states.

“People don't always like the tax situation. But as long as taxes help people, I'm in favor of it,” he said.

George also acknowledged that after Walz and the Democrats won control of the House within the 2022 elections, they moved more quickly to boost some taxes on the rich.

“They wanted to get some things done for the people,” he said.

The Harris team found that Minnesota ranks sixth within the nation in CNBC's study of one of the best places to do business.

They also highlighted several private investments in Minnesota, reminiscent of the Expansion price $5 billion currently on the Mayo Clinic in Rochester, Minnesota.

In an official statement, the Harris campaign team said that Walz had been a robust leader and had taken measures that had led to tax cuts for working families.

“After Donald Trump devastated our nation's economy, Governor Walz led Minnesota back on its feet with strong leadership, competent administration and smart policies – with tax cuts for working families and the state's lowest unemployment rate in history,” said Charles Lutvak, spokesman for the Harris campaign.

“Every day until November 5, Trump will have to defend his record of instability and his unpopular anti-growth agenda against the Harris-Walz team's record and vision of promoting corporate growth, creating jobs and reducing costs for the American people.”