It was the humblest and most obscure among the DFL’s orgy of tax pushes this past session. 

And it may be the one that has the broadest impact fastest

The DFL imposed a tax on warehouse services this past session; basically, if it goes into a warehouse, you pay for it.  And pay.  And pay. 

And Minnesota businesses are not amused:

With a warehousing services tax looming next spring, Rochester businessman Eric Lawrence is rethinking the company’s expansion plans.

That means “not hiring any more people”.  Back to McDonalds, proles – and remember, it’s for A Better Minnesota!

The president and CEO of Red Wing-basedLawrence Transportation Company had been looking to build a new warehouse facility in Winona but tapped the brakes on the plan. While the warehousing tax isn’t the sole reason for delaying construction, he said it is a major factor.

“I want to grow this business. I want to offer the services and have the space to do it, but it’s not worth the risk,” he said.

With Hudson, Prescott and La Crosse just across the river and sharing the same (or better) transportation links that Red Wing has?  

The DFL-led Legislature approved extending Minnesota’s sales tax to commercial warehousing services last month. The proposal is expected to generate nearly $100 million for the state per year once it takes effect April 1, 2014.

It won’t, of course.   Ripping 6.75% plus out of the bottom line of the warehousers – which is not an especially high-margin business to begin with – makes it a no-brainer for any company.  

Senate Majority Leader Tom Bakk, DFL-Cook, said during a recent visit to Rochester that the warehouse tax enabled lawmakers to repeal a requirement cities and counties pay state sales taxes — a cost that got passed on to property taxpayers. It also helped fund an upfront refund for business capital equipment purchases.

“We thought (the warehousing tax) was a business-to-business service that wouldn’t harm economic growth, but we put it in effect in April so we could assess what potential issues that are with it because we’ve never had it before, and if there are some ramifications, there will be time to make some corrections to it,” Bakk said. “But right now, today, I don’t see it having a hindrance on economic output.”

“I don’t see it having an impact”. 

This is from the leader of a party that thinks “supply chain” is something you pay $20 extra for at Deja Vu. 

Critics disagree. They argue the tax will encourage Minnesota companies to warehouse their products in other states…Among the businesses concerned about the tax is Red Wing Shoes. The company declined to provide comment for this article. But in an interview with the Star Tribune’s Neal St. Anthony, Red Wing Shoes President Dave Murphy said the company has decided to delay plans for a new $20 million distribution center in Red Wing as a result of the tax.

I know of one major company in Greater Minnesota with a very large warehouse component that has been quietly renting up all the warehouses it can find in a neighboring lower-tax state (with better transportation connections and easier building permitting to boot); if that company leaves, it will gut the job market in its neighborhood.

It’s not just the warehouse tax that’s got them shopping.  But every little bit hurts, when you’re trying to be competitive with surrounding states thatjust plain get it – they understand competition, having spent the past forty years competing with their fat ‘n happy neighbor at the top of the Mississippi River. 

So when your warehouse gig moves off to Superior or Grand Forks or La Crosse, just remember – it’s For A Better Minnesota!