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For business, grass is greener — here!

That anti-government refrain about Minnesota being too generous for workers — and thus, bad for business — always tends to grow louder as temperatures and political campaigns heat up. But so far this summer we seem to be hearing a little less exaggerating about all our “successful” people and businesses packing up and moving to low-tax states like Florida.

smith photo
Dane Smith

It could be that all the economic news and statistical evidence is running so strongly against this old bromide that its purveyors know they will look foolish. In 40 years of tracking these statistics, as a journalist and policy advocate, I do not recall as much consensus that Minnesota is beating the competition. Study after study and ranking after ranking puts our North Star State near the top or heading in the right direction, with the 5th fastest growing economy in the nation according to the latest estimate from the U.S. Bureau of Economic Analysis.

Thus, most of the anti-government campaign rhetoric seems to be directed against a glitchy MNsure health care benefit expansion (which actually has reduced our uninsured percentage to record lows), a new office building project at the Capitol, and an increase in the state budget.

For decades, our relatively well-governed state has performed much better on both economic rankings and quality-of-life measures than low-tax states in the South, West and other parts of the Midwest.

Ranked 2nd for ‘Economic Opportunity’

In recent rankings published by Forbes magazine, one of the nation’s leading media voices for conservative pro-business policy, Minnesota ranked second for “Economic Opportunity,” third  for “Best Place to Make a Living” and eighth among “Best States for Business.” In other words, great for workers AND great for employers.

Other states are beginning to take notice of Minnesota’s exceptionalism, or note their own shortcomings, and recent reports from Michigan and Florida bear this out.

One case in point is a hefty study released this month by Michigan Future, a respected organization led by some of the Great Lakes State’s top business and philanthropic leaders. The title almost says it all: “State Policies Matter: How Minnesota’s Tax, Spending and Social Policies Help it Achieve the Best Economy Among Great Lakes States.”

The report concludes that “There is no question Minnesota is a high-tax state. … But it has largely invested that additional revenue in services and investments that matter in a knowledge-based economy. An educated workforce, efficient transportation systems, vibrant cities and metropolitan areas, and a secure safety net for those making the transition to a global economy all matter in creating a prosperous state.”

The Michigan Future report praises Minnesota for:

  • Pioneering investment in early childhood education.
  • Tax-base sharing between metropolitan cities and suburbs.
  • Sharing of state revenue for local school districts that goes back to the bipartisan “Minnesota Miracle” of the 1970s.
  • A recent higher education tuition freeze.
  • Per capita K-12 education investment that exceeds Michigan’s by more than 40 percent.
  • And a safety net that is second only to Alaska’s in helping poor families maintain dignity and viability.

All kinds of factors explain the ever-changing economic rankings between states. Taxes and levels of investment in human capital and infrastructure are often not the most important factor in short-term fluctuations in rankings. A breakthrough in technology — think of ag processing in the Midwest or microchips in the Silicon Valley — can propel and sustain a region for decades. A collapse in demand for a particular product can bring decline, especially if a region’s economy is too dependent on a single sector.

Natural wealth in Texas, N.D.

A few low-tax states, such as Texas and North Dakota, also are doing well, but they are benefiting from enormous newfound natural wealth — namely, royalties and job creation from the “fracking” boom and a revolution in fossil fuel retrieval. Meanwhile, many other low-tax states are not doing very well at all.

From the low-tax paradise of the Sunshine State, a recent report by the Florida Alliance for Retired Americans offers a litany of dire statistics — and warns retirees and others considering a move there about socioeconomic indicators that are approaching Third World conditions.

Among the rankings in the report, headlined, “Florida: A State of Embarrassment,” are these:   third greatest income inequality in the U.S., third highest long-term unemployment rate, third lowest per capita total education investment, second lowest per capita higher education investment, eighth highest violent crime rate, top rankings in home foreclosures and “underwater” mortgages, and high rates of health care fraud and identity theft.

While the Sunshine State’s balmy climate and lack of an income tax might be attractive to the very richest retirees, the report alleges that in totality, Florida’s economy and government services reduce the potential for future prosperity there.

The debate over Minnesota’s business climate likely will get new life because of the Medtronic-Covidien merger and the decision to move the corporate headquarters to Ireland for corporate tax purposes while keeping operations and expanding jobs in Minnesota. This development already has revived some of the anti-tax, anti-government narrative. A rather large set of inconvenient facts will undermine that argument.

Ireland is one of those allegedly “socialist” European countries, with better government entitlement programs and higher taxes overall than the United States, along with a single-payer health care system.

One could argue that we need to become more like Ireland in reducing national and state corporate tax rates to improve our business competitiveness. But Ireland is a lot more like Minnesota than Florida when it comes to human capital investment, economic security, and the somewhat larger public sector and higher tax obligation that entails.

Dane Smith is the president of Growth & Justice. A version of this column originally appeared in the St. Paul Legal Ledger Capitol Report.

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Comments (7)

  1. Submitted by Todd Hintz on 06/30/2014 - 09:13 am.

    MN

    Way to go, Minnesota! Just don’t tell the Republicans about the report as they want you to believe our job economy sucks and is going down the toilet due to our governor and legislature. It’s all doom and gloom because to say otherwise would be to admit that the Democratic policies are working. And the last things anyone can do is say their opposition has some good ideas.

    For some people the glass is not only half full, but what’s left is quickly leaking out.

  2. Submitted by jody rooney on 06/30/2014 - 09:53 am.

    I’m not so sure that Medronic is leaving Minnesota

    as much it is avoiding Federal tax laws. I thought I read that the IRS was targeting Medtronic and other corporations that were holding large amounts of cash off shore.

  3. Submitted by Dennis Tester on 06/30/2014 - 10:23 am.

    Coincidentally

    A new report from McGladrey, the global accounting and consulting firm, based on survey responses from executives at 920 U.S. manufacturing and distribution firms, including 62 from Minnesota found that only 42 percent of Minnesota respondents said they are “thriving.”

    http://www.minnpost.com/twin-cities-business/2014/06/more-minnesota-manufacturers-say-theyre-thriving

    “Sixty-five percent of Minnesota respondents said regulations are having a negative impact on growth, among the highest level among states. In fact, three-quarters of Minnesota manufacturers said they believe regulations and taxes will limit growth more than even competition from other companies.”

    Also …
    • 90 percent expect health care costs to rise
    • 73 percent cited the Affordable Care Act as their greatest limitation to growth

    Ironically, McGladrey has relocated its headquarters from Minneapolis to Chicago.

    Bottom line, Minnesota companies are succeeding in spite of government, not because of it.

  4. Submitted by John Edwards on 06/30/2014 - 11:26 am.

    Credible Source?

    With 40 years of experience, Dane Smith should know that the credibility of the source is more important than the story. A huge clue here is that Michigan Future describes itself as nonprofit and nonpartisan. That, of course, means it is liberal. I think MinnPost bills itself that way,too.

    It also means that it is not an unbiased source. For example, Michigan Future president and co-founder Lou Glazer served in the administration of Michigan’s former Democratic Gov. James Blanchard. That salient piece of information should have been included somewhere in Smith’s lengthy account. Clearly, Michigan Future is a political organization pushing to have that failing blue state adopt Minnesota’s left-wing solutions. It is not an unbiased, credible source.

    This reminds me of 1973 when gullible Minnesotans got tingles up their legs when Time Magazine described Minnesota as a “State That Works” without realizing that the magazine’s editor Hedley Donovan was also a native of the state pushing the presidential bid of DFLer Wendell Anderson. After Anderson failed to gain traction, Donovan later went to work in the administration of Jimmy Carter, a governor who did become president.

  5. Submitted by Rachel Kahler on 06/30/2014 - 01:37 pm.

    Soooo…

    How do you explain away the Forbes pieces?

    • Submitted by jason myron on 06/30/2014 - 07:56 pm.

      They can’t

      they just happened to see more good news about the Minnesota economy and can’t handle it. It completely demolishes their contention that republican policies work and Democratic policies fail. Look no further than one state east to see how badly a republican governor and legislature can screw things up.

  6. Submitted by Chad Laughlin on 06/30/2014 - 08:55 pm.

    The Midwest has been an interesting laboratory of ideology and policy over the last decade or so. Several states which had been very similar to MN for decades have gone (albeit by small margins at the ballot, but full bore with policy) to the “gov’t is the problem” solution. Wisconsin, Michigan, Indiana to name a few. And what was promised with low taxes on the wealthy, higher taxes and worse services for the poor bringing upon a utopian period of economic expansion has NEVER happened. Never. Now these states lack healthy metropolitan economies (the type of economy that matters in today’s global world) so it could be that they were in for hard times no matter the policies enacted. Doesnt morally excuse making the poor suffer disproportionate to the wealthy. But none of them have had any measurable advantage over their high tax, high service neighbors (MN, IL). As the article states the only “get govt out of the way” states that one can find that have had booming economies have had the privelage of abundant natural resources (oil, coal, and Florida’s white sand) to sell to the vibrant metro markets. I feel this is pretty much an observable fact. So why is the ideology still so prevelant? I’m not sure I can fully answer that, but to my own experience as an old philosophy major and reformed libertarian is graduating from the simplistic psychological tendency to see the world as a place to embrace me, the ever important individual being that is me. I only really started to understand the world ( a questionable assertion that I understand the world if anyone wants to criticize my two cents ) through the humility that comes with accepting that it takes all types, and everyone to make “a village”. And that I, me, ruler and sole occupant of my thoughts mattered no more no less than every other person. And that the city, neighborhood, community i habititated in was actually a village (take that Hobbes) I personally look back at graduating from libertarianism as the moment I grew up and quit rationalizing the world according to my inner world and naive state of self importance. But I do remember that this transition was hard, and that the initial psychology that had brought me to libertarianism was strong. So if I (ME!) am going to begin to understand the ideology of get govt out of the way and why it’s so prevelant against the waves of evidence that suggest its not so, I would look for answer within social psychology. Rush Limbaugh looked there too, and his private jet looks down on those that have allowed him a private jet and laughs all the way to wherever his private jet is headed. Because these debates rarely are won with facts and data, but how people are made to feel by the people making the arguments. Rush, in this sense, is a genius, but a million Rush Limbaugh’s with their own private planes does not make a country great. And ultimately MN isn’t better because WI is worse.

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