State’s economy heading in wrong direction
If you’re like most Minnesotans, you may believe our state is doing great economically. We’ve long been proud of our renowned work ethic, our high educational attainment, and the many Fortune 500 companies that call our state home.
But a new report from Center of the American Experiment details the worrisome clouds on our state’s economic horizon. The report makes clear that in recent years, Minnesota’s traditionally competitive economy has underperformed other states on most major economic indicators.
Worse yet, our own state agencies forecast an even rougher road ahead. The Minnesota Department of Employment and Economic Development, for example, projects that Minnesota will underperform the nation in job creation in 19 of the 22 major job categories from now until 2024.
What’s going on?
Since 2000, Minnesota’s growth in gross domestic product, the most basic measure of economic success, has been below the national average, as has our productivity. We’ve lost some of the most productive jobs in information technology and durable goods manufacturing, while the job growth we’ve had is disproportionately in less productive sectors like education and health services.
Meanwhile, many indicators suggest that our state is poised for an even darker economic future. Here’s a startling fact: Minnesota now has one of the lowest rates of small business formation in the nation. The Twin Cities ranks last in earnings from self-employment among the 15 largest metro areas. The last company started by a Minnesota entrepreneur to earn a place in the Fortune 500 was United Health in 1977 — 40 years ago.
Many of our most productive citizens are streaming out of the state and taking their talents with them, while residents of other states are not choosing to move here. In 2013, our net loss of household adjusted gross income through state-to-state migration was $697 million. In 2014, after our Legislature passed a major income tax increase, that figure was a whopping $948 million.
The folks who are leaving aren’t primarily snowbirds. The largest component is people in their prime-earning years — ages 45 to 54. At the same time, we are experiencing a net in-migration of people making $25,000 or less, who receive significant government “transfer payments” and don’t contribute much in taxes.
What can we do to turn things around? There’s good evidence that our state’s public policies are neutralizing the natural advantages — advantages like high workforce participation, family cohesion and educational attainment — that have historically kept our economy strong.
Today, Minnesota’s hefty tax and regulatory burdens add greatly to the costs of doing business here. Our taxes are among the highest and most progressive in the nation. Recently, Minnesota earned a shocking D-plus on a major survey of small business friendliness, ranking 29th of the 35 states analyzed.
In recent years, we have increased the taxes and regulations with which businesses must cope, while states like Indiana, Tennessee and North Carolina have decreased them.
Our great state is living off its heritage of hard work and diverse economic portfolio. The public policies we’ve embraced appear to be nullifying our impressive natural and cultural advantages. To ensure a strong economic future for our children, we need to reduce Minnesota’s heavy tax and regulatory burden to unleash the potential we all know is there.
This is the opinion of Katherine Kersten, a senior policy fellow at the Center of the American Experiment.