If Governor Walz really wants to help small businesses, cut their taxes

Gov. Tim Walz has proclaimed this week as Small Business Week in Minnesota. The press release reads:

From September 13 – 15th of this week, Commissioner Grove will be visiting small businesses to celebrate their contributions to their communities and the SBA will host a three-day virtual summit with numerous educational panels providing innovative practices for entrepreneurs. 

“Here in Minnesota, new small businesses are more likely to be thriving at five years than anywhere else in the country,” said DEED Commissioner Steve Grove. “At Minnesota’s Department of Employment and Economic Development (DEED), we are working hard to support small businesses whether they are launching the next new medical device start up or have been a community staple for decades.”  

I confess, I am not clear what numbers Commissioner Grove is citing here. As we noted in our report ‘The State of Minnesota’s Economy: 2020‘ earlier this year:

Figure 29 shows that, in 2020, New and Young Businesses — those which are five years old or less — accounted for just 31.3 percent of all businesses in our state. For the United States generally, the figure was 37.7 percent and Minnesota ranked 38th. This is lower than in 2000, as Figure 30 shows. Between 2000 and 2020, the share of Minnesota businesses which were New and Young Businesses fell by 4.6 percent. As we have seen throughout this report, this move was in the same direction as the national trend but was more pronounced here.

One reason for this is Minnesota’s rates of corporate income tax, which are some of the highest in the United States. Indeed, in the last session, Walz proposed to raise them even higher. If he really wants to help Minnesota improve its poor record when it comes to small businesses, lumping them with more taxes is not the answer.