• Minnesota Governor Tim Walz has a strained relationship with some of his state’s business interests
• Walz’s conflicts with business have a common theme: Walz advocated higher taxes on the rich or on corporations, and business leaders resisted.
• Business groups and executives who met with Walz said they got the impression that Walz was not making any real compromises.

Six years before Tim Walz was appointed Vice President Kamala Harris‘ running mate was busy campaigning for governor of Minnesota. Shortly before election day, Walz met with dozens of business leaders at a luxury hotel on the shores of Gull Lake.

Eric Gibson, then president of Ultra Machining Company, recalled asking Walz whether the Democrat believed high corporate and state taxes were hurting workers.

“We don’t tax people,” Walz replied, according to Gibson. “We tax corporations.”

For Geoff Baker, “it was a bit of an ‘oh crap’ moment,” he recalled to CNBC, confirming Gibson’s report. “That’s not what I wanted to hear,” said Baker, president of McFarland Truck Lines.

Minnesota The current corporate tax rate is 9.8%, the highest corporate tax rate of any state in the country, according to the nonpartisan Tax Foundation.

Walz’s approach to corporate and other business-related taxes has not changed noticeably since that meeting at Gull Lake. Especially since Democrats achieved a triple majority in 2022, taking control of the House, Senate and governor’s office.

“It was tense,” said Douglas Loon, president and CEO of the Minnesota Chamber of Commerce, of the trade association’s relationship with Walz. The chamber has over 6,000 members, including Fortune 500 giants such as Target, UnitedHealth Group and Best Buy.

CNBC spoke to nearly half a dozen people familiar with the power struggles and reviewed letters to the governor and disclosure reports on lobbying at the state level.

They show that Walz’s political struggles were centered around a common theme: Walz supported higher taxes on the rich and corporations, and business leaders resisted.

One of the issues at issue was a 1% surtax on passive capital gains income over $1 million. Walz also signed legislation creating a tax on global intangible low-taxed income (GILTI).

Another new wealth tax that Walz enacted limits the standard and itemized tax deduction for households with gross incomes over $220,000.

But while Walz was often willing to meet with business interests and listen to their arguments, the governor and his Democratic Party colleagues in power rarely gave in.

The meeting with Walz left business associations and executives with the impression that the two-term governor was not 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 tax legislation is reflected in the priorities of a potential Harris administration.

Tensions regarding wage tax

One of the biggest recent conflicts between Walz and the state’s business community has revolved around a new payroll tax to fund universal paid family and medical leave for Minnesotans.

That law, which Walz signed in 2023 and will take effect in 2026, would impose a 0.7% payroll tax on workers’ wages, with employers and employees sharing the tax payment, according to the Tax Policy Center.

At the time, state regulators said the payroll tax could ultimately rise to 0.88 percent, a figure often cited by opponents of the tax. But supporters believed a new payroll tax could raise more than $300 million to fund paid family leave, according to the Minnesota Reformer.

As part of the intense lobbying against the law, meetings were also held with the governor himself.

At least eight representatives from the Minnesota Chamber of Commerce, including Loon, met with the governor last year in his Capitol office in St. Paul, Minnesota, to oppose the bill before the governor signed it, according to Baker, who was present at the meeting and whose company is a member of the pro-business lobbying group.

“We were very concerned about the corporate benefit regulations,” including the impact of the payroll tax on businesses, Baker said. They also tried to encourage Walz to push for more tax reforms to get the state out of the top tier of corporate taxes, Baker explained.

Even though Walz listened to them, the governor ended up signing the bill anyway, and the state remains the state with the highest corporate taxes.

The Uber compromise

For a different perspective on Walz and taxes, the Harris campaign referred CNBC to Bill George, a Minnesota businessman and former CEO of Medtronic.

George said Walz was willing to compromise with the economy.

One example he recalled was a recent bill that would have mandated a minimum wage in Minnesota. The bill passed the state legislature, but ride-hailing giants Uber and Lyft threatened to reduce their presence in the state as a result.

Walz vetoed the legislation in 2023. He later signed a separate bill to increase wages for ride-share drivers.

George said Minnesota is a great place for him to do business, but acknowledged that taxes are high in some states.

“People don’t always like the tax situation. But as long as taxes help people, I’m in favor of it,” he said.

George also acknowledged that after Walz and the Democrats won control of the House in the 2022 elections, they moved more quickly to raise some taxes on the wealthy.

“They wanted to get some things done for the people,” he said.

The Harris team found that Minnesota ranks sixth in the nation in CNBC’s study of the best places to do business.

They also highlighted several private investments in Minnesota, such as the ongoing $5 billion expansion of the Mayo Clinic in Rochester, Minnesota.

In an official statement, the Harris campaign team said that Walz had been a strong leader and had taken measures that had led to tax cuts for working families.

“After Donald Trump devastated our nation’s economy, Governor Walz led Minnesota back on its feet with strong leadership, competent administration and smart policies – with tax cuts for working families and the state’s lowest unemployment rate in history,” said Charles Lutvak, spokesman for the Harris campaign.

“Every day until November 5, Trump will have to defend his record of instability and his unpopular anti-growth agenda against the Harris-Walz team’s record and vision of promoting corporate growth, creating jobs and reducing costs for the American people.”