9/15/2009 by Patrick Garmoe

(Photo: Duluth auditor Danielle Buchberger, board chairwoman of the Minnesota Society of Certified Public Accountants, says the state’s tax structure needs change to encourage growth.)

Unless you move in Minnesota’s accounting circles, there’s a good chance you’ve never heard of Danielle Buchberger.

An auditor with Duluth area accounting and auditing firm, Eikill and Schilling Ltd., Buchberger is one of many voices sounding the need to reform the state’s tax system.

She’s the current board chairwoman of the Minnesota Society of Certified Public Accountants, and also served on the Governor’s 21st Century Tax Reform Commission, which early this year made 13 recommendations to Gov. Tim Pawlenty and Minnesota’s Legislature. The recommendations were designed to create jobs by making Minnesota more enticing to companies and adding transparency to the tax system.

“We looked at fairness,” Buchberger said, adding that while the group collectively concluded that corporations do need to be taxed, greater equitability is needed.

“We won’t be able to fund the services that our government is providing,” Buchberger said, if the tax structure isn’t adjusted to encourage more business and job growth.

“Minnesota’s once-enviable growth has fallen off in recent years, and we now lag the U.S. average on key economic indicators,” commissioners wrote.

Commission Chairman Michael Vekich said ultimately these proposals should make the state more competitive not only with other states, but countries across the globe.

That was the main reason the 15 commissioners advised scrapping the corporate income tax.

Currently the state’s corporate income tax rate stands at 9.8 percent, third highest in the world.

To help replace that revenue, the commission also advised expanding the sales tax, but didn’t specify what items ought to be added.

Nearly two-thirds of consumer goods and services are exempt from tax, according to the report.

Mark Haveman, executive director of the Minnesota Taxpayers Association and a member of the commission, said living in a high-tax state hasn’t yet hurt Minnesota much— partly because, until recently, it was much more difficult and often more costly to set up companies in other states or countries.

“I think there is a fundamental recognition that if we want to have any semblance of a chance to continue the level of services we’re used to in Minnesota, we better grow our tax base,” Haveman said.

In addition, the state has shifted from primarily manufacturing industries to service-based industries and is home to an increasingly older population. The tax code needs to address that, commission members said.

During the last session several of the commission’s proposals were included in the omnibus tax bill vetoed by the governor. But the veto wasn’t because of the tax reform proposals. Vekich said Pawlenty has voiced support for roughly 70 percent of the group’s recommended changes.

Haveman asserts the timing for tax reform this spring was unfortunate. The effort to eliminate $5 billion in debt overshadowed serious discussion of long-term reform, he said.

During the session next year, several senators and representatives are planning to put the reforms into law in bills like SF 1274, authored by Sen. Ann Rest, DFL-New Hope.

“I did indeed use a number of those recommendations in my tax reform proposal,” said Rest, who sits on the Senate Tax Committee. If approved, the bill would phase out the corporate income tax by 2013; provide an up-front exemption for capital equipment purchases; and add clothing, legal services, accounting, bookkeeping and tax preparation purchased by consumers to the sales tax.

Vekich, Haveman and Buchberger believe commission proposals definitely have the potential to become law.

“I think our recommendations did plant some seeds that will take some time to germinate, but they’re there,” Haveman said.

To read the full report, visit www.taxes.state.mn.us/mntaxreform/index.shtml.

Patrick Garmoe is a Duluth-based freelance writer. He can be reached at 218-340-9995 or at www.patrickgarmoe.com.

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