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Good at business? Not so much

This op-ed appeared in the Shakopee Valley News on July 19, 2017.

Minnesota has much to be proud of in CNBC’s latest annual ranking of America’s Top States for Business. We rank second in the country on education. On quality of life we rank third. We are fifth nationwide for technology and innovation. Overall, our state ranks third.

But Minnesota 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. 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 all but seven other states. We are one of the 43 states to have its own income tax, but that rate — 9.85 percent on incomes over $156,911 — is higher than anywhere else apart from California, Maine, and Oregon.

We are one of only 14 states plus the District of Columbia that levy an estate tax. Only three of these states 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 that has a corporate income tax. The top rate is higher than any state except Iowa and Pennsylvania. Added to the federal rate of 35 percent, Minnesota has one of the highest rates of corporate taxation in the world.

Gov. Mark Dayton has trumpeted CNBC’s ranking as a vindication of his policies. The truth is quite the opposite. The two measures where the state performs worst are the variables approximating to state economic policy.

Minnesota has some strong cards in its economic deck. Its Big Government economic policies aren’t among of them.

John Phelan is an economist with Center of the American Experiment in Golden Valley.

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