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High Cost of Doing Business in Minnesota No Deal Breaker for CNBC

There they go again. CNBC just ranked Minnesota as the nation’s fourth best state for business in the financial network’s 2016 annual rankings. In a state where being above average is an integral part of the folk lore, there’s a real temptation to take the ranking to heart.

Sure, Minnesota appears in good company, behind Utah, Texas, Colorado and just ahead of North Carolina.

Yet it turns out Minnesota’s standing rests significantly on two factors that have little directly to do with the business of business–quality of life and education. When it comes to those metrics, Minnesota can hardly be beaten, finishing second in both categories.

But the North Star State takes a big hit on bottom line indicators that drive business decisions like regulations and tax rates. On the business friendly scale, Minnesota ranks 27th among the states. In another warning sign, Minnesota’s economy slipped markedly from fifth in 2015 to 17th. Moreover, CNBC’s scorecard underscored the state’s high taxes.

Minnesota’s worst category this year is the Cost of Doing Business, where it comes in at 35th — an unfortunate consequence of taxes that are among the highest in the nation. Minnesota has the top individual income tax rate of 9.85 percent and the corporate tax rate is 9.8 percent. State and local sales tax are both 7.875 percent.Map of States

How does a state that ranks below average on most key business metrics still rank in the top five overall? Don’t forget the cable network turned a lot of heads last year by ranking Minnesota numero uno. True, the finding was widely written off by many employers who actually operate businesses in the Land of 10,000 Taxes. Not to mention CNBC viewers like this Illinois resident who felt compelled to comment on the ranking a year later.

Minnesota was #1 last year because of quality of life. Many parks, jogging trails, lakes to fish and water ski on. How does this relate to a business wanting to relocate there?

Yet the buzz became a valuable selling point for Gov. Mark Dayton and other big government advocates. But this year, the cable network sent a signal that Dayton’s policies appear to be faltering.

Gov. Mark Dayton claims that his state is high-tax, high-value, but job growth and the overall economy have slowed a bit in the last year.

The reality is much worse than that. Watch for American Experiment’s major study of Minnesota’s economy, the most in-depth analysis of the state’s economic performance in modern times, coming soon.

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