Are 200 Horizon Milling jobs the first casualty of the new tax hikes passed by Gov. Dayton and the DFL-controlled legislature?
Cargill, CHS, Inc. and ConAgra are in the process of merging their flour milling operations into a new firm called Ardent Mills and just last week they announced Denver will be the new flour milling superpower’s headquarters. Cargill and ConAgra will each own a 44 percent stake and CHS, Inc. will own 12 percent. Thus, Twin Cities-based corporations hold a majority stake.
Cargill and CHS, Inc. already operate a joint venture, Horizon Milling, and presumably most of Horizon’s 200 high paying Minnesota jobs will be moving to Denver.
Folks in Minnesota should be asking why the new firm and its jobs won’t be headquartered in the Twin Cities. The most important question: Did Minnesota’s tax system push Ardent Mills away?
Many joint ventures do pick a neutral site for their headquarters. Denver lost the MillerCoors headquarters to Chicago when Miller and Coors combined.
But the Twin Cities was reportedly under consideration, as was Omaha, the corporate headquarters for ConAgra. Back in March, Scott Portnoy, vice president of Cargill, was quoted in the Pioneer Press saying the Twin Cities, Kansas City and Omaha were all under consideration for the new headquarters. At the time, there was no report that Denver was on the list.
March also happens to be when the debate over Gov. Dayton’s proposals to raise income taxes on the rich and impose new taxes on businesses was in full swing and we all know how that turned out. Minnesota now has the fourth highest income tax rate on top earners in the nation. Even the Star Tribune editorial board called the 9.85 percent rate “a competitively uncomfortable perch for a state that’s home to 19 Fortune 500 companies that aim to attract top talent.”
There’s no question companies take a state’s tax regime into consideration when they decide where to locate. Horizon Milling’s 200 jobs could very well be the first casualty of the higher tax rates Dayton and the DFL-controlled legislature put into place. Remember, they raised taxes by $2.1 billion to solve a $627 million deficit.
Even before the 2013 tax hike, Colorado offered tax advantages to Ardent Mills. In 2012, the Tax Foundation, in collaboration with KPMG, released a report, Location Matters, which compares actual state business tax burdens for seven model firms. All business taxes are considered, including tax credits aimed at luring businesses. In doing so, they created the only apples-to-apples comparison of state business taxes that I know of. One of the model firms just happens to be a corporate headquarters.
According to the Tax Foundation report, Minnesota’s total effective tax rate on new corporate headquarters ranks 46th in the nation at 26 percent. Colorado ranked poorly as well (34th), but their total effective tax rate was 18.3 percent, substantially less than Minnesota’s rate.
Colorado also offers a much lower flat income tax rate of 4.63 percent for Ardent Mills' employees. At 4.63 percent, Colorado’s rate is quite a bit lower than the Minnesota’s 7.05 percent rate, which applies to anyone making more than $30,000.
Despite the fact that Colorado is also entirely controlled by Democrats, Colorado’s constitution includes income tax provisions that limit the damage lawmakers can do to the state’s tax regime in any given year. Importantly, the Colorado constitution requires income to be taxed at one flat rate.
This means that Ardent Mills higher income employees can rest assured that they won’t experience year-after-year tax hikes like we’ve seen in California, which now has a top rate of 13.3 percent. Minnesota does not offer any protection against future hikes to fund the DFL’s spending wish list.
These favorable tax provisions almost certainly contribute to the fact that Minnesotans have been on the move to Colorado in recent years. Ardent Mills is just the latest example. In my report, Minnesotans on the Move to Lower Tax States, I found that thousands of Minnesota households and hundreds of millions in income, on net, are now leaving Minnesota each year. And Colorado has been one of the largest beneficiaries of this migration. Colorado received the fourth most income of all states from Minnesota between 2005 and 2010. $152 million in adjusted gross income moved from Minnesota to Colorado over that time period.
While taxes are only one part of the decision to move for any business or family, taxes are clearly part of the decision. My report shows that Minnesotans are indeed moving to lower tax states. Unfortunately, we should expect more Ardent Hills-type stories in the news now that Gov. Dayton and the DFL-controlled legislature upped the incentives for Minnesota businesses and families to find a more welcoming tax climate.