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Eric Black Ink

Shocking study says Minnesota not really all that bad for business

By Eric Black | 04/28/11

A new study by the crazy Bolsheviks at Ernst & Young and their fellow travelers at the Council On State Taxation finds, surprisingly, that Minnesota is in the top 10 (although barely) of states ranked for the “competitiveness” of their business tax climates.

If you live here and listen to the constant complaining about the tax climate for “job creators,” this should be surprising.

The factors and calculations in such a calculation are way over my head, but E&Y and COST said they designed the study specifically to hone in on the state tax policies and rates that are “designed to retain and expand employment and attract new investment."

hat tip/Ken Wedding and Susan Schnur.

Furthermore, “The analysis focuses on capital investments in industries that have location choices, such as factories or headquarters,” and “the results reflect the type of analysis that businesses use to evaluate decisions about where to locate new capital investments in plant and equipment.”

Anyway, the whole sordid, shocking study is available here.

Minnesota ranks 10th from the top. Overall, the top 10 and bottom 10 lists are counterintuitive, at least if your intuition is shaped by stereotypes of various states. The worst 10 list includes Alabama, Mississippi and several other states that populate the list of states that – at least in my biased and uninformed brain – pop to mind when I think of low-tax, small-government, anti-union states that would offer businesses anything to get them to build there. The most competitive list contains no entries from the South but is scattered across the north from the East Coast (Maine is #1) to Oregon (#2) and includes relatively rural and urban places.

Nor does either list seem to comport with any impression of which states have fared the best or worst in the horrible jobs environment of the recent recession. (For example, the very best state in the business tax climate ranking (like I said, it’s Maine) currently ranks 17thamong the states with a March  unemployment rate of 7.6 percent, which is better, but not all that much better than New Mexico, ranked as the worst of all states for its business tax climate but ranked 23rd among the states with an unemployment rate of 8.1 percent.

The states with the lowest (North Dakota) and highest (Nevada) current unemployment rates don't show up on either the 10 best or the 10 worst states when ranked by E&Y for business tax policies designed to get comanies to build and hire.

Of course it just may be the case -- Ernst and Young explicitly says that it is the case – that differences in tax rates are not the key factors that lead businesses to build and hire in one state over another.

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Comments (14)

Submitted by Bill Kellett on April 28, 2011 - 3:56pm.

Eric, your link to the study doesn't work.
Does the study state what the key factors are that lead businesses to build and hire in one state over another? Are there key factors always used for those decisions?
Perhaps if we knew which states are the leaders in retaining and expanding employment and attracting new investment we could copy their tax and other policies until we reach political/business nirvana.

Lowest unemployment states, ND, NE, SD, NH, VT.
States with highest GDP, CA, TX, NY, FL, IL.
Lowest state income tax rate as a percentage of income, NH, SD, TX, CO, FL.
Lowest state corporate tax rate, NV, WY, SD, WA, OH.

Where to move? It's complicated.

Submitted by Paul Brandon on April 28, 2011 - 4:03pm.

The differences in actual (as opposed to marginal) state taxes paid by businesses in different states are not that huge.
Obviously things like infrastructure, educated labor and markets; things that Minnesota has more of than the deep South; are more important.
Those unemployment rates are not huge, given the complexity of the phenomenon. UNDERemployment is at least as important.
That's why E-Y take many pages (I'll know how many when I can get at the paper -- there seems to be a problem with your link above).
Is this it, by any chance?
http://www.ey.com/Publication/vwLUAssets/Competitiveness_state_and_local_business_taxes/$FILE/Competitiveness_state_and_local_business_taxes.pdf

Submitted by Ray Schoch on April 28, 2011 - 5:18pm.

Gosh, Eric, you mean Republican spokespersons might not be telling the whole truth when they insist that Minnesota has such high taxes that companies can’t operate here. and the wealthy are threatening to (sob) leave the state for the far more exotic and tax-friendly environments of the Dakotas or Iowa? What’s an ordinary citizen to believe if he can’t rely on the truthfulness of Tony Sutton, Tom Emmer, Amy Koch, and other prominent Republicans?

Submitted by Kevin Reichard on April 28, 2011 - 5:27pm.

Here's the real URL:

http://www.ey.com/Publication/vwLUAssets/Competitiveness_state_and_local_business_taxes/$FILE/Competitiveness_state_and_local_business_taxes.pdf

Submitted by Greg Kapphahn on April 28, 2011 - 8:15pm.

But as we all know, our "conservative" friends looking, as they do, through their "money goggles" (the existence of which their dysfunctions leave them completely unable to notice),...

Will look at this report and see...

NOTHING BUT BLANK PAGES.

Their ideas and ideals about "business climate," tax rates, etc., are, of course, not based in anything but those perspectives their psychological dysfunctions require them to hold in order that they might feel comfortable living in the world.

All else is simply incomprehensible to them. We can site this and other, similar studies until the weather becomes very icy in what is reputed to be an EXTREMELY warm place and it will not make the slightest dent in their obtuseness.

These people cannot be educated. They can only be opposed, exposed, and removed from power as soon as possible.

I only hope Gov. Dayton can and will hold back the tide of toxic legislative slime they're trying to spray across our entire state until we have an opportunity to send them packing.

Submitted by Eric Black on April 29, 2011 - 12:31am.

thanks guys. I think I fixed the link now to the full study.

Submitted by Brian Simon on April 29, 2011 - 12:51pm.

"The states with the lowest (North Dakota) and highest (Nevada) current unemployment rates don't show up on either the 10 best or the 10 worst states when ranked by E&Y for business tax policies designed to get comanies to build and hire."

That should not come as a surprise. There is not as direct a relationship between corporate success and the employment rate as the pundits would have us believe. This likely leads from the talking point that 'private enterprise creates jobs' [not government]. Without getting into the veracity of that particular statement, we can clearly see today that while corporate profits are up, the unemployment rate is still up. Why?

Because corporations don't hire based on profits, they hire based on growth - if they are growing such that their existing workforce can't deliver all the products & services demanded, the company will hire. A state's business climate is ancillary to the basic laws of supply & demand.

Submitted by Alec Timmerman on April 29, 2011 - 9:30pm.

Eric,
Take a look, for even more evidence, at Forbes Magazine. Unlike the one issue sounds bites from the tax payer league, Forbes takes a more comprehensive look at business friendliness. According to Forbes, no commie outfit, Minnesota ranks 15th. A far cry from the 43rd that the TPL and the state GOP claim.

http://www.forbes.com/2010/10/13/best-states-for-business-business-beltw...

Submitted by Richard Schulze on April 30, 2011 - 6:29am.

It's hard to counter religion with facts...

Submitted by Paul Brandon on May 1, 2011 - 12:49pm.

Amen!

Submitted by Sheryl christina on May 1, 2011 - 6:58pm.

Adding to the sarcasm....taxes should be raised for one and all...then the utopia will surely come.

Submitted by Bill Coleman on May 2, 2011 - 11:18am.

It is obvious by the evidence that the MN business climate must be at least OK. Even now, MN manufacturers are doing quite well. We have more Fortune 500 headquarters per capita than any other state. We are a center of ag trading with Cargill and CHS. We are the retailing capitol with Target, Best Buy and General Mills. Plus the successful medical device companies and others.

We are now in an interesting phase in the business climate discussion. The chief business climate critics - members and funders of the MN Chamber and the MN Business Partnership - also are the driving force behind the Itasca Group's new regional economic development partnership. This new group is supposed to drive the economic development strategy, marketing and branding for the region.

The things that attract and stimulate development - great schools k-12 through graduate schools, great transportation including transit, quality of life enough to attract top talent - are all on the chopping block at the state capitol thanks to the new majority party elected with the support of the Chamber and Business Partnership. Likewise, openness to diversity and innovation, also hallmark business and talent attractors, are also headed for oblivion thanks to the MN GOP Moral Majority legislative initiatives.

If Ernst and Young rate our tax climate for business 10th, then combined with our other advantages, we must be more than OK.

Submitted by William Pappas on May 2, 2011 - 10:47pm.

Once again, as with out state's K-12 education system, republicans have spent the last ten years shouting to the rest of the nation how lousy our business climate is. Thanks guys. In reality we all know that businesses like it here due to a number of factors, like our incredibly productive labor force and a still functioning government/private enterprise partnership. Where would we be if republicans had spent their time promoting business in Minnesota rather than fear mongering that the rich were leaving the state,taking their corporate headquarters with them and fleeing our terrible business environment.

Submitted by Dan Gerber on May 8, 2011 - 9:05pm.

For what it's worth, I heard this story on the radio
about the time this article was posted.

Studies: Rich Don't Flee High-Tax States
by Robert Smith, National Public Radio

http://minnesota.publicradio.org/features/npr.php?id=135813061