[image_caption]Robert W. Velez[/image_caption]
It is because I miss Minnesota that I take umbrage with the oversimplistic case made by John Phelan in his Community Voices commentary about whether the Minnesota taxpayer gets high value for their high taxes. His answer is no, and he marshals some understandable quantitative evidence to support his claim. I get it. No one likes paying taxes – I don’t care if you’re a Democrat, Republican, Green, Libertarian, or None of the Above – and the notion that tax rates drive businesses and high-income earners out of the state for lower tax states has reached mythological proportions. However, as I tell my students, it’s a bit more complicated. After living a couple of years in a state with no income taxes, I would still return to Minnesota if given the chance.
No. 2 on quality-of-life metric
In my first year in Texas, I earned a salary slightly less than I was earning in Minnesota the previous year, but I took home more thanks to Texas’ lack of a state income tax. Sounds great, right? Sure, if the amount you pay in taxes is directly related to your quality of life. But how can Minnesota score so highly on the quality-of-life metric used by U.S. News & World Report, which listed the Land of 10,000 Lakes as No. 2 (behind North Dakota), if citizens get such a lousy deal from the high taxes they pay? Again, as I tell my students, correlation doesn’t equal causation. Despite the anti-tax zealots time and again heaping scorn onto Minnesota’s high taxes, its core cities still attract businesses and new residents.
While I’m not going to lay out an empirical case to show how Minnesota compares to low-tax Texas, I’ll provide some much-needed context to Phelan’s gloomy piece.
Low wages, not taxes, keep people from getting ahead
First: Taxes don’t keep people from getting ahead. Yes, they account for a percentage of our earnings, but in Minnesota, median income is higher than in low-tax Texas and many other low-tax states, particularly in the south. It is low wages that keep people from getting ahead and most mainstream economists would agree that wages have remained relatively flat for at least the last few decades.
Second: Citizen participation in government is much higher in Minnesota than in Texas. That’s due to a number of factors, but at least part of the explanation is that the political culture of Minnesota is more focused on egalitarian principles rather than top-down governance by distant elites at the state Capitol. Minnesotans appreciate the superior public goods created by those high taxes – like mass transit, green spaces, and environmental protection – while folks in Texas are reluctant to tax themselves to create those public goods. We’re not necessarily undertaxed in the Lone Star State, of course; here, they like to call things “fees” instead of “taxes,” and the ruse works well to keep the anti-tax narrative afloat.
Support vs. ‘rugged individualism’
Finally, it’s much better to be an employee in Minnesota than it is in Texas. We spend a lot of our lifetime working for a living. A big difference I’ve seen between Minnesota and other states is that the employee enjoys broader support from the institutions of democracy there than in a place like Texas. “Rugged individualism” runs rampant across Texas — until, of course, some tragedy occurs that is outside of the individual’s control. Then the complaints about the lack of assistance for those in crisis flow freely.
Are there ways to use the taxpayer dollar more efficiently and effectively? I’m sure there are. And in a state like Minnesota where government is not viewed as the enemy – thanks again to the political culture – people can come together to solve problems and engage in continual improvement. Government is not some alien interloper constantly looking for ways to take a few more dollars out of your pocket. It’s just what we call it when the community does things together. The low-tax / anti-government mantra perpetuated by organizations like Phelan’s Center of the American Experiment just don’t get it.
You betcha.
Robert W. Velez is a member of the political science faculty at The University of Texas Rio Grande Valley.
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Thanks for the state comparisons. I have heard the same from friends who have left Minnesota. Many have returned. Minnesota’s quality of life is very high, which is what employers want. Happy employees are good employees. If you look at rankings of things that concern employers, taxes are way down the list.
Well said, Mr. Velez! Taxes are the price we pay for civilization, Oliver Wendell Holmes said, and the interesting thing is that the free-market democracies with larger public sectors and higher taxes also tend to be more civilized, with better living conditions overall and for all, especially for those on the bottom half. I’m a Texas native, wouldn’t trade my life in the North Star State for the Lone Star State under any circumstances.
Thanks, Bob.
Well said.
Quality of life is a matter of personal perception and the aspects of life we individually value the most. Among the places each of us have lived, experiences we’ve had, most of us have favorites. Even within Minnesota, those who have lived in several locations usually have a favorite.
There is no one size fits all. Minnesota has qualities some value more than others. Personally I’ve lived in seven states and don’t rate any as having a superior quality of life. Each had its pluses and minuses. If I had to choose one over the others, it would be a decision based on personal friendships and proximity to family, not a perception of quality of life. That is what we make it.
The writer argues that despite high taxes, Minnesota ranks second on a U.S. News quality of life rating. But while Minnesota is near the top of lists of most heavily taxed states, No. 1 North Dakota is ranks in the middle of the pack (or lower). High taxes not equate with quality of life.
All Minnesotans are not enthralled by the “quality of life.” The state has been losing domestic population for years – more moving to other states than from other states. Immigrants are the basis for the population growth the state has experienced.
A good place? Sure. A well-educated, hard-working labor pool is an economic plus. But there also are drawbacks for many, including high taxes.
If you wanted to live in Minnesota, you would live in Minnesota.
It seems that you’ve been gone awhile. The last three Minnesota governors have played the fee card.
“in the Lone Star State, of course; here, they like to call things “fees” instead of “taxes,” and the ruse works well to keep the anti-tax narrative afloat.”
Just this week,
“Minnesota Gov. Tim Walz’s budget would increase fees on boating, opioids, water users. Republicans say the fees are no different than tax increases.”
http://www.startribune.com/gov-tim-walz-budget-would-increase-fees-on-boating-opioids-water-users/507061702/
I am from Minnesota. I lived in Texas for eight years, but returned to Minnesota for family reasons. I would be interested to hear from others who have lived, worked, and owned homes in both states.
Really, high quality of life in North Dakota? Have you been to North Dakota? Somehow, the beat out Minnesota without high taxes.
As a transplant, I can attest to the value of out-state experience by which to view Minnesota. I get a good chuckle when conservatives moan about the higher tax rate here. Its a Grover Norquist auto response syndrome kind of thing. Its in the DNA. My taxes are well invested here in roads, parks, and other infrastructure and the quality of life aspects are easily visible, but it really helps to have that outsider perspective. You really don’t know how nice it is here till you experience the alternative.
https://www.usnews.com/high-schools/best-high-schools/articles/2018-05-18/see-high-school-graduation-rates-by-state
Interesting comparison, via interactive map, of high school graduation rates; Minnesota is well below average, Texas is well above. And, Texas has the most schools of any state with a 100% graduation rate.
I recently opened my 2019 Hennepin County property tax statement – yet another 10% bump. The bill includes about one thousand dollars of voter approved school district levies. Those always pass by a wide margin. After all, it is for the children, who continue to be underserved regardless of how much is spent per pupil. This tax is self inflicted; I have my neighbors to thank.
I think it prudent to ask county officials exactly where the money went. Property taxes are made up of city and county services. The county does have a high level of spending for social services and management. There are states that have high quality ratings including WA, NH, ME, VT, Atlanta area, CO, etc.. Although many of these also have high taxes, although not as high as the Twin Cities. Until people question where the money exactly goes and there are impartial studies on the effectiveness, it will continue. Look at the mess with the day care program at the state–that is a good study–well meaning and needed, but out of control. One can be in favor of social services, but also want efficiency and effectiveness vs throwing money at the problem. The caucus method is for the most part outdated, although it could be used to discuss issues and then have a primary poll to ensure all can vote.
Yes Steve, my taxes went up as well, did you also notice your property value probably went up? They are linked. Property values go up because of market demand, evidently some folks see value in living here vs moving away. Wonder what that is? .
Hennepin County property taxes increase every year, even when values decline. If you owned a home in 2009, you experienced this.
Well Steve, sorry have owned a home in Hennepin county, same 1 since 1984, that statement is in correct, and yes got those tax statements to prove it. Had a value crash in ~ 2000, had another one in 07-08. Funny thing, we keep adding more highways streets, sewer, water, parks, county buildings, services like recycling, Metro mobility etc. etc. and folks say, why isn’t the cost of maintaining and running all this stuff going down? OR should we kick grandpa, grandma, and the folks, kids in wheelchairs to the curb? Midland Texas plains looking better yet?
No need to apologize for owning property in Hennepin County. In what year(s) did your property taxes decrease and by what percent? Thanks for the kick-grandma-to-the-curb hyperbole – that one never gets old.
Your taxes are well invested in infrastructure? The governor seems to to think it is not enough; he is fighting to increase state gasoline tax $.20 per gallon, a 70% hike. And, that freeway bridge did fall unexpectedly into the Mississippi River.
I’d suggest we be careful blaming property taxes on the State.
It’s mostly schools, cops and drainage.
Thank you, Professor Velez.
Having lived my whole adult life in just various parts of Minnesota, I don’t have that same quality-of-life comparison available to me, that you have, but then Minnesotans land in states like Texas for many reasons – schooling, employment, health, climate, western spaces, etc.
I was struck instead, by your comparisons of the attitude toward government, and the involvement we have in our governing as citizens. I appreciate Minnesota as a caucus state, which brings many (we wish for even more) directly into the political party process. I appreciate having a Metropolitan Council, made up of citizens across the Twin Cities area, that is not simply composed of already-elected officials, and that represents wide varieties of cultural, employment and educational perspectives. And, I appreciate open meeting laws and open appointments processes (and wish that these weren’t as regularly violated as they are).
I’m glad life is good for you in Texas, but we’d welcome you back ‘home’ to Minnesota, if that opportunity presents itself down the line. Let’s see, there’s Bemidji, Duluth, Mankato, Moorhead, Winona, St. Cloud….
Mr. Velez has obviously not studies the miracle of Somalia or all of the other small government low tax examples of superior economies, unfettered liberties, and high qualities of life.
Somalia has actually improved somewhat, since the business people suffered from the lack of a government when there were no rules, no protection from theft except private guards, no standards for cell phones (the phones from one company could not talk to phones from any other company), no way of enforcing contracts or preventing one business from cheating another.
The real showcase for right-wing libertarianism is Honduras. The government there loves to woo foreign companies with promises of cheap labor and no unions or environmental laws, and it spends next to nothing on public services. The rich live in walled compounds or gated communities with private guards, private water sources, private power sources, private schools, private health care, private everything, and servants willing to work for almost nothing.
(In the past few years, Honduras has also been marketing gated resort communities, especially along the coast or on the offshore islands, to foreign retirees and tax dodgers. Yes, I’ve seen online advertisements telling North Americans that they can escape taxes and regulations and hire live-in servants by moving to Roatan or some other resort area.)
The rest of the people scrape by as best they can in the second poorest country in the Western Hemisphere. It is not a coincidence that the majority of the much-touted “caravan” was from Honduras.
Here is our reply…
https://www.americanexperiment.org/2019/03/no-it-isnt-minnesotas-high-taxes-that-make-our-state-great/
In short, the correlation from which Mr Velez infers causation doesn’t exist.
JP, the world is bigger than “taxes” , as most folks have alluded to, seems conservatives have only 1 measure of life “Taxes”
https://www.cnbc.com/2018/07/10/americas-top-states-for-business-2018.html
Minnesota isn’t at the top, but it isn’t at the bottom either, look at that quality of life factor, and that includes 20 below winters! , ,
Ironically the answer is enshrined in that sacred conservative cow, “The free Market”, don’t like the total package and the price, we can get that Texas “Rugged Individualism” go get ourselves a new total package at a different more acceptable price. Perhaps carve it out of that Midland Texas plains. I had the opportunity some years back, but declined, for many, quality of life reasons.
From the State Demographer:
https://mn.gov/admin/demography/news/ada-to-zumbrota-blog/?id=36-291406
“Since 2002, Minnesota has maintained consistent annual domestic out-migration – that is, more people moving out of Minnesota to other states than people moving into Minnesota from other states. The most recent year of data, 2015, shows that Minnesota had about 13,700 (net) international migrants and about -1,800 (net) domestic migrants. In sum, our international arrivals rescued us from experiencing negative overall migration, resulting in a total (net) migration of about 11,900 arrivals in 2015. ”
Market forces at play. Governor Walz plans to increase taxes and fees, if allowed to pass, will accelerate the annual domestic out-migration.
You say that as if it’s a bad thing. 13,700 eager new upstarts, looking to capitalize on their new chance certainly sounds more appealing than 1800 folks squatting on their wealth, suppressing potential innovation and competition, don’t you think?
It was said by the Minnesota state demographer. I believe that people coming is good and people leaving with their wealth the state is hoping to tax is bad. How are those Minnesotans squelching innovation prior to their exit?
Whats your point Steve? Your link, figure 1 page 1, appears something is wrong with your explanation?
“While both the U.S.-born population and foreign-born population have grown since 1970, the foreign-born population has swelled more quickly”
Easy to get the more quickly part, suggestion that immigrants can or cannot find the state appealing, or immigrants are or are not capable of bringing value to the state or what?
W/O investigating suspect many states in the US have similar issues, white folks are not reproducing at replacement rates. And where better to find it than on a far right propaganda site: ! https://www.breitbart.com/politics/2019/01/13/states-birth-rate-2017/
The of point of the story told by the numbers presented by the State Demographer seems obvious, though it runs counter to the popular narrative that our state’s population is growing because people want to come here from other states. There is a net out-migration every year. Minnesota grows because births outnumber deaths two to one and international migration. Glad to have them, but does it really speak to our quality of life that people, many of them refugees, are willing to come here from third world countries?
Well not sure about your explanation, we live on the “poor side of town” north of the North Loop, the NL, and NE are exploding with apartment and condo projects, the housing prices in the poor side of town went up ~ 14% Y/Y and our taxes went up as well. Don’t have the facts at my finger tips, but observation suggests those NL &NE apartments etc. are not being filled with 3rd world immigrants, you also missed the Brietbart article, “all states” are short on replacement rates.
Didn’t miss the Breitbart article, though I know that no one on this comment board would accept a link to Breitbart from me. The article is about white people, not that relevant. Minnesota is an out-migrant state and has been for many years; people leave here to non-out-migrant state destinations.
Apparently the “experiment” Mr. Phelan is trying to perform is one of pretending to critique tax policy without understanding what a “correlation” actually is. This is a common problem with Republican pseudo-intellectuals who put cherry picked data next to each other and claim to have discovered a “correlation”, or even more grandiose, an actual “causation”.
I just don’t why anyone provides space for these CFE garbage analysis?
I’ve lived in Minnesota for 31 years: I came here from neighboring Iowa because teacher salaries are considerably higher here. But taxes are higher also – so the net effect was not nearly as great as I had been led to expect. Still, people do not go into education for the money. I’ve always made enough to support myself quite well, but I’m hardly what one might call “wealthy.” That being said, it’s been my experience that those Minnesotans who complain the loudest and most frequently about excessive taxes – and, to a slightly lesser extent, government spending – tend to be those with the highest incomes. I’m not begrudging anyone their wealth, but in the case of, say, property taxes, is it REALLY necessary to own a luxurious five-bedroom, four-bathroom McMansion with a deluxe 3-stall garage on .75 acres of wooded splendor? Is four bedrooms and three baths on a half-acre somehow beneath your dignity?
The person complaining the loudest beneath this column is me. I live in a house beneath the house that is beneath that house you described. In financial transactions, I am interested in the value proposition. Minnesota is flagging with respect to other states. When the proper time comes, I will be an out-migration participant.
Thought this was apropos to the conversation, headline from a Star Tribune article this morning:
Number of top income tax filers continues to rise in Minnesota
That article is behind the paywall, what does it say? Are these high tax payers moving here from other states? Are people here creating wealth at a rate that exceeds their out-migration?
We could argue about which hell hole nation is the best example of Republican/Libertarian economics, but the fact remains that they simply cannot point to a small-guvmnt low tax/no tax country anywhere in the world that outperforms liberal democracies much less the United States. There are many countries with much better health care systems, but NONE of them are low tax/no tax utopias.
At the end of the day all we’re ever left with is this constant, never ending, inane, self perpetuating whine about having to pay taxes. As if paying taxes converts all citizens into victims of relentless oppression. There is not and never has been any data or facts to support the great American tax whine. We collect taxes to pay for government services and those services are an essential feature of advanced civilization and successful communities and Nations.
The only reason Republicans have had any success with this garbage is that we as a nation have guided our political mentalities into a realm of facile ignorance. Small govment never had any merit, in fact it never even actually had a definition or a coherent description.
Both Korea and Ireland are among the countries that get along nicely with a lower tax tab than Americans pay.
In the 1996 State of the Union address, President Bill Clinton drew applause with the proclamation, “The era of big government is over!”. Democrats are now working to bring it back.