U.S. Vice President and Democratic presidential candidate Kamala Harris and her running mate Minnesota Governor Tim Walz walk as they prepare to depart at Chippewa Airport in Eau Claire, Wisconsin, U.S., August 7, 2024.
Kevin Mohatt | Reuters
Six years before Tim Walz was tapped to be Vice President Kamala Harris’ running mate, he was busy running for governor of Minnesota. Shortly before Election Day, Walz huddled with dozens of business leaders at a luxurious hotel off the shores of Gull Lake.
Eric Gibson, then president of Ultra Machining Company, recalled asking Walz whether the Democrat believed that high corporate and state taxes hurt workers.
“We’re not taxing people,” Walz replied, according to Gibson. “We’re taxing businesses.”
For Geoff Baker, “it was a bit of an ‘oh s—‘ moment,” he recalled to CNBC, confirming Gibson’s account. “That’s not what I wanted to hear,” said Baker, president of McFarland Truck Lines.
Minnesota currently taxes corporate income at 9.8%. The nonpartisan Tax Foundation says that’s the highest corporate tax rate of any state in the nation.
Walz’s approach to corporate and other business related taxes hasn’t changed noticeably since that meeting on Gull Lake. Especially not since Democrats secured a trifecta majority in 2022, taking control of the state House, the Senate and the governor’s office.
“It’s been tense,” said Douglas Loon, president and CEO of the Minnesota Chamber of Commerce, describing the trade association’s relationship with Walz. The chamber has over 6,000 members, including Fortune 500 giants like Target, UnitedHealth Group and Best Buy.
Democratic presidential candidate, U.S. Vice President Kamala Harris and Democratic vice presidential candidate Minnesota Gov. Tim Walz take a selfie in front of a sign that reads “Kamala and The Coach” during a stop at a campaign office on August 9, 2024 in Glendale, Arizona.
Andrew Harnik | Getty Images
CNBC spoke to nearly half a dozen people familiar with the fights, and reviewed letters to the governor and state lobbying disclosure reports.
They reveal that Walz’s policy battles have had a common theme: Walz supported higher taxes on the rich or on businesses, and corporate leaders fought back.
One of the fights was over a 1% surtax that applies to passive investment income in excess of $1 million. Walz also signed legislation that enacts a tax on global intangible low-taxed income[GILTI].
Another new tax on the wealthy that Walz signed into law limits standard and itemized tax deductions for households with gross incomes of more than $220,000.
But while Walz was often willing to meet with business interests and hear their arguments, the governor and his fellow Democrats in power rarely budged.
The impression that business groups and executives were left with, after meeting with Walz, was that the two-term governor wasn’t always interested in compromise.
As Harris prepares to release her first economic policy plans later this week, investors and business owners will be watching closely to see whether Walz’s approach to the tax code is reflected in the priorities of a potential Harris administration.
Payroll tax tensions
One of the biggest recent battles between Walz and business in the state was over a new payroll tax to fund universal paid family and medical leave for Minnesotans.
That bill, which Walz signed into law in 2023 and goes into effect in 2026, requires a 0.7% payroll tax on employees wages, with the employer and employee splitting the tax payment, according to the Tax Policy Center.
At the time, state regulators said the payroll tax could eventually rise to 0.88%, a figure often cited by opponents of the tax. But supporters believed that a new payroll tax could bring in over $300 million to help fund the paid family leave plan, according to the Minnesota Reformer.
A fierce lobbying push against the bill featured meetings with the governor himself.
Minnesota Governor Tim Walz speaks next to Wisconsin Governor Tony Evers at Yellowjacket Union, at University of Wisconsin-Superior, in Superior, Wisconsin, U.S. March 2, 2022.
Evelyn Hockstein | Reuters
At least eight representatives from the Minnesota Chamber of Commerce, including Loon, met with the governor at his capitol office in St. Paul, Minn. last year to push back against the legislation before the governor signed it, according to Baker, who was at the gathering and whose company is a member of the pro-business lobbying group.
“We were very concerned about the workplace benefit mandates,” including the impact businesses could face from the payroll tax, said Baker. They also tried to encourage Walz to move ahead with more tax reform laws to try to get the state out of being in the top tier of corporate income taxes, Baker explained.
Though Walz did hear them out, the governor ended up signing the bill anyway and the state continues to be the top taxed state for corporate income.
The Uber compromise
For another perspective on Walz and taxes, the Harris campaign referred CNBC to Bill George, a Minnesota businessman and the former CEO of Medtronic.
George said Walz has been willing to compromise with business.
One example he recalled was a recent bill that would have mandated minimum wage in Minnesota. The bill passed the state legislature, but rideshare giants Uber and Lyft threatened to reduce their presence in the state because of it.
Walz vetoed the legislation in 2023. He later signed a separate bill to raise rideshare drivers’ pay.
George said he sees Minnesota as a great place to do business, but he acknowledged that some taxes are high.
“People don’t always like the tax environment. But as long as taxes are going to help people, I’m in favor of it,” he said.
George also admitted that once Walz and Democrats won control of the legislature in the 2022 elections, they moved more quickly to increase some taxes on the wealthy.
“They wanted to get some things for the people through,” he said.
The Harris team noted that Minnesota is ranked sixth in the nation in CNBC’s study of the best places to conduct business.
They also highlighted several private sector investments in Minnesota, like the $5 billion expansion underway at the Mayo Clinic, in Rochester, Minn.
In a formal statement, the Harris campaign said Walz has been a strong leader and enacted polices that have cut taxes for working families.
“After Donald Trump devastated our nation’s economy, Gov. Walz led Minnesota back with strong leadership, competent management, and smart policies – cutting taxes for working families and reaching the lowest state unemployment rate in recorded history,” said Harris campaign spokesman Charles Lutvak.
“Every day until November 5, Trump will have to defend his record of instability and unpopular anti-growth agenda against Team Harris-Walz’s record and vision to foster business growth, create jobs, and lower costs for the American people.”