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CNBC’s Top States for Business rankings are a slap in the face for Minnesota’s economic policymakers

Embattled Governor Dayton was quick to trumpet Minnesota’s third place on CNBC’s latest annual ranking of America’s Top States for Business. But a closer look at the rankings shows that there is little to be proud of here in terms of economic policy.

What we do well and not so well… 

The rankings are driven by a number of criteria. On some our state does very well. We rank second in the country on Education. On Quality of Life we rank third. We are fifth nationwide for Technology & Innovation.

But our state doesn’t fare so well on other measures. Business Friendliness grades “the states on the freedom their legal and regulatory frameworks provide for business”. Here, we have slumped six places since last year to 33. Another measure, Cost of Doing Business, looks at utility costs, “the competitiveness of each state’s tax climate, as well as state-sponsored incentives that can lower the cost of doing business… (and) the cost of wages, as well as rental costs for office and industrial space.” On this measure, we rank 36th.

Sadly, there is little surprise here. Minnesota is one of the most highly regulated and taxed states in America.

In 2015, the Pacific Research Institute ranked Minnesota 32nd for small business regulation. We had particularly low scores (a rank below 30) on Workers’ Compensation, Family Leave Regulations, Right-to-Work laws, Land Use Regulations, State Energy Regulations, Regulatory Flexibility, and Telecommunication Regulations.

As a share of state income, state-local taxes are higher in Minnesota than in all but seven other states. We are one of the 43 states to have its own income tax, but that rate – 9.850% on incomes over $156,911 – is higher than anywhere else apart from California, Maine, and Oregon. We are one of only fourteen states plus the District of Columbia which levy an estate tax. Only three of these sates have a lower exemption and nine states and the District of Columbia have a lower starting rate of estate taxation. We are also one of the 45 states which has a corporate income tax. The top rate is higher than any state except Iowa and Pennsylvania. Added to the federal rate of 35%, Minnesota has one of the highest rates of corporate taxation in the world.

Hold on a second, Governor Dayton

The two measures which approximate to state economic policy are Business Friendliness and Cost of Doing Business. These are also the two measures where the state performs worst. Minnesota has some strong cards in its economic deck. Its Big Government economic policies aren’t among of them. Governor Dayton might want to think twice before touting this ranking.

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