Tax System Business Information Group - DOC

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					                             21st Century Tax Reform Commission
                                          June 6, 2008


Members present: Chairman Mike Vekich, Philip Albert, David Beito, William Belanger,
Danielle Buchberger, David Carlsen, Corey Haaland, Mark Haveman, Joy Lindsay, Jerry Morris,
Rebecca Paulsen, Kate Rubin, John Spry, David Welliver

Chairman Vekich opened the meeting with a review of the Governor’s Executive Order that
established this Commission.

Discussion was held regarding the scope of the study, which differs from other tax studies in that
it focuses on business taxes. Some taxes that might be included are listed in an Ernst &
Young/COST publication (“Total state and local business taxes – 50-state estimates for fiscal
year 2007”). Those taxes include, but are not limited to, property taxes on business property,
general sales taxes on business inputs, corporate income tax, unemployment insurance, business
and corporate license, excise taxes, individual income tax on business income, public utility
taxes, insurance premiums taxes, and other business taxes.

Chairman Vekich encouraged the members to be creative in their thinking so that the report is
beneficial for the Governor and other policy makers. The objective of the study is to identify
ways to encourage businesses to come and stay in Minnesota. Simply shifting taxes from one
business to another will not accomplish this goal, so it is necessary to adopt a broad outlook.
There will be a separate portion of the study that includes issues and/or policies that the
Commission believes policy makers should address.

Dan Salomone, Deputy Commissioner at the Minnesota Department of Revenue, led a discussion
on revenue neutrality, a mandate of the Executive Order. At the early stages of this study, it is
necessary to not focus on balancing the budget but rather focus on good tax policy for the long-
term. The issue of neutrality will be taken into account later in the discussions and

A presentation on tax policy principles was given by Dan Salomone and a group was formed (see
below) to work on principles for the Commission.

Paul Wilson, Tax Research Director at the Minnesota Department of Revenue, presented an
overview of business taxation in Minnesota.

Members were asked by Chairman Vekich to think of areas where Minnesota is not competitive
with other states in their business taxation and also what works in our state, to be discussed at the
next meeting.

A suggestion was made to invite the State Demographer Tom Gillaspy to come to an upcoming
meeting, as well as State Economist Tom Stinson. Dan Salomone will contact them.
The next meeting will be held on Friday, June 20, 2008.

Work Group
A work group was formed with members Mark Haveman (Chair), Danielle Buchberger, Jerry
Morris, Rebecca Paulsen, Kate Rubin, John Spry, and David Welliver. Their task is to determine
and define guiding principles of good tax policy, and develop strategies to attain them. They are
to share the results of their work at the next meeting on June 20.

Requests for Information
Members requested several pieces of information to assist them as the project moves along.
They include:
    DOR’s “Model Revenue System”, Tax Expenditure Study, Tax Gap Studies (Income and
       Sales), and Incidence Study – all are available on the Department of Revenue website
    Detailed information on the cost of compliance, including costs of processing, auditing,
       collections, appeals, etc. by tax type and income level if possible
    Effects of long-term reductions of business taxes on state revenues in other areas
    Exemptions to Minnesota sales tax
    List of states that exempt clothing from sales tax
    JOBZ statistics
    Other locations (states, countries) that are more business competitive – what services they
    Information and data about the property tax refund program
    Data on capital gains

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