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New report shows that Minnesota’s economic performance has been lackluster and raises doubts about future performance

Late last year, we produced the report The State of Minnesota’s Economy: 2017 and its subtitle was ‘Performance continues to be lackluster’. A new report supports this finding.

Where Minnesota’s economy has been

The most recent edition of the ALEC-Laffer State Economic Competitiveness Index gives Minnesota an economic performance rank of 22nd out the 50 states – right in the middle.

The authors arrive at this by looking at the state’s performance in three performance variables. The first is Gross Domestic Product, the cumulative growth between 2006 and 2016. Here we rank 19th in the nation with growth of 35.9%. Second is absolute domestic migration, cumulative between 2007 and 2016. Here rank 37th with a net outflow of 67,000 people. Third, is the cumulative growth of non-farm payroll employment between 2006 and 2016. Here, our growth of 5.8% ranks our state 18th nationally.

Where Minnesota’s economy might be going

The authors of the report also construct an economic outlook ranking based on 15 state policy variables, shown below. Here, sadly, Minnesota ranks 44th. This is up from 45th last year and the low of 48th in 2015, but is down from 37th in 2011.

There are some bright spots. Minnesota ranks in the top 10 for both its state liability system and its recently legislated tax changes (2016 and 2017). Our state falls just outside the top 10 for debt service as a share of tax revenue.

But the warning signs outweigh these. Minnesota ranks in the bottom ten for top marginal income tax rate, top marginal corporate income tax rate, personal income tax progressivity, and remaining tax burden. It also levies an estate tax and is not yet a right to work state.

Americans seem to love ranking their states. Minnesota’s media likes to plaster these rankings all over the place when they reflect well on the state. A little pride can be a good thing and there is much to be proud of in this state. But if we want to keep it that way, we need to keep an eye on where our economy might be heading.

John Phelan is an economist at the Center of the American Experiment. 




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