Latest Posts

Home

Facebook

Twitter

Search
About

Do Minnesotans get high value for high taxes? Evidence suggests the answer is no

This op ed appeared at Minn Post on March 7th, 2019

Are Minnesota’s taxes too high?

This was the question posed by MinnPost reporter Peter Callaghan last week. Nobody denies that Minnesotans are some of the most heavily taxed people in America. As the Center of the American Experiment noted in our report, “The State of Minnesota’s Economy: 2018,” the state’s top rate of income tax — 9.85 percent on taxable incomes over $156,911 — is higher than anywhere else apart from California, Hawaii, and Oregon. And Minnesota’s lowest income tax rate of 5.35 percent is higher than the highest tax bracket in 23 states.

But, so the argument goes, they get a lot from their state government in return for these high taxes. Callaghan quoted Sen. Melisa Franzen, DFL-Edina, as saying, “When people and businesses come here, they’re not doing us a favor to pay their taxes. … They know what they’re getting in return with the investments that we make in our roads and bridges and education and workforce.”

But is this true?

Franzen’s praise for Minnesota’s roads and bridges is rather surprising given that Gov. Tim Walz is proposing to raise the state’s gas tax by 20 cents a gallon – from 28th nationally to fourth – because, he says, “Minnesota’s crumbling infrastructure is putting our safety at risk.” Indeed, the American Society of Civil Engineers recently said that “Minnesota’s 140,000 miles of roads are in poor condition, earning a grade of a “D+.” In terms of “roads and bridges,” it isn’t clear what the “people and businesses” who come to Minnesota are getting for their high taxes.

Franzen might seem to be on firmer ground with the state’s education system. In the much-quoted U.S. News and World Report ranking, Minnesota comes in seventh nationally. On scores from the National Assessment of Education Progress (NAEP), our state ranks fourth.

But if this is a result of our high taxes, as Franzen argues, how do we explain the performance of Massachusetts, which comes top on the NAEP scores but ranked 11th lowest nationally in 2018 for its Individual Income Tax, according to the Tax Foundation, while Minnesota ranks 46th? How is it that New Hampshire’s education system performs better – ranking third – with an Individual Income Tax ranking of ninth nationally? At the other end, the District of Columbia ranks 48th nationally for its Individual Income Tax. On Franzen’s logic, it should have a good education system to show for this high tax burden. Instead, it ranks a lowly 51st on the NAEP scores.

In short, there is no correlation between how high a state’s tax burden is and how well its education system performs (See Figure 1 below). The examples of New Hampshire and Massachusetts show that we could have slightly better educational outcomes at a much lower tax burden.

Minnesota has high taxes and lousy roads. It has high taxes and good educational outcomes, but other states have better outcomes with much lower taxes. The idea that Minnesotans get value for their high taxes is an article of faith in the state. Sadly, it isn’t supported by the evidence.

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

Figure 1: Individual Income Tax burdens and NAEP scores

Source: The Tax Foundation and the National Assessment of Education Progress

Comments

Subscribe

Categories

Upcoming Events

  • YLC Curling Event

    Location: Chaska Curling Center 3210 Chaska Blvd, Chaska, MN 55318

    Grab your broom and stone and join the Young Leadership Council for an evening of Curling at the Chaska Curling Center! $40 registration includes: Instruction Ice time and equipment Appetizers (Curling Center Bar will be available to purchase drinks) The event will begin with 15-20 minutes of classroom instruction on curling rules and basics followed by 20-30 minutes on the ice for practice and drills. Instructors will be on hand the whole evening to guide your games. Dress Code: Bring a pair of clean-on-the-bottom shoes to change into. No leather soles or metal lace hooks Loose fitting or strechy clothes…

    Register Now
  • The Diversity Delusion

    Location: Hilton Minneapolis 1001 South Marquette Avenue Minneapolis, MN 55403

    Please join Center of the American Experiment on Wednesday, April 24th at the Hilton Hotel for a lunch forum with Heather Mac Donald as she discusses her new book, The Diversity Delusion: How Race and Gender Pandering Corrupt the University and Undermine Our Culture.  Heather Mac Donald is the Thomas W. Smith Fellow at the Manhattan Institute, a contributing editor of City Journal, and a New York Times bestselling author. She is a recipient of the 2005 Bradley Prize. Mac Donald’s work at City Journal has covered a range of topics, including higher education, immigration, policing, homelessness and homeless advocacy, criminal-justice reform, and race…

    Register Now
  • 2019 Annual Dinner Featuring Nigel Farage

    Location: Hilton Minneapolis 1001 South Marquette Avenue Minneapolis, MN 55403

    Purchase Tickets Here

    Register Now