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Minnesota is Among the Least Economically Free States

Many Minnesotans are quick to believe the North Star State’s economic performance is well above the norm. Unfortunately, Minnesota’s economy has been mediocre, at best, for some time.

Public policies that keep high taxes and burdensome regulations in place have weighed the state down and resulted in an under-performing economy. These policies restrict economic growth in Minnesota because they undermine economic freedom.

According to the Fraser Institute’s annual Economic Freedom of North America 2016 report, Minnesota is ranked one of the least economically free states in the U.S. The report defines economic freedom as “the ability of individuals to act in the economic sphere free of undue restrictions” and uses three subcategories—government spending, taxes, and labor market freedom—to measure how supportive a state’s policies are of this freedom.

The freest economies operate with minimal government interference, relying upon personal choice and markets to answer basic economic questions such as what is to be produced, how it is to be produced, how much is produced, and for whom production is intended. As government imposes restrictions on these choices, there is less economic freedom.

Since 1982, Minnesota’s overall economic freedom has been below the U.S. average.

Source: Dean Stansel, Jose Torra, and Fred McMahon. Economic Freedom of North America 2016. Vancouver: Fraser Institute, December 2016.

When measured against other states’ overall economic freedom Minnesota ranked 42nd in 2014, mostly due to a heavy tax burden.

As of this report’s most recent data (2014), Minnesota’s tax burden is the fourth highest overall when examining major forms of taxation—income (personal and corporate) tax, payroll tax, property tax, and sales tax. The states with higher taxes in these categories overall are the usual suspects: New York, California, and Hawaii.

It’s no secret Minnesota’s tax burden restricts private choice and decreases economic freedom, and the Center has not been shy about calling out the state’s high taxes and over-regulation. Just over a year ago, the Center published a report written by Dr. Joseph Kennedy that confirms Minnesota’s economy has lost its historic economic competitiveness and is not the leading force it once was.

But the story doesn’t end here, and Minnesota can do better. Look for an update to the Kennedy report by the Center’s economist, John Phelan to learn more about the current state of Minnesota’s economy and solutions for future growth.

Source: Dean Stansel, Jose Torra, and Fred McMahon. Economic Freedom of North America 2016. Vancouver: Fraser Institute, December 2016.

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