City Pages: State with lowest tax burden is “crushing” its neighbors

On Monday, City Pages posted an article attacking our recent report, The State of Minnesota’s Economy: 2018. In the interests of presenting their readers with both sides of the debate, we submitted a response. Sadly, City Pages declined to run it. So, as a service to their readers, here is our reply.

I read Pete Kotz’ recent article about our new report ‘The State of Minnesota’s Economy: 2018’ with a mixture of amusement and bafflement. Frankly, his argument makes no sense, resting, as it does, on data he himself cites which flatly contradicts his argument.

Only after two paragraphs of feverish ad hominem does Mr. Kotz actually get to his point. His article is titled ‘Despite propaganda, Minnesota’s ‘high tax’ economy is crushing Wisconsin, Iowa’. This is laughably parochial. There are 47 other states in the country besides Minnesota, Wisconsin, and Iowa. When we looked at IRS migration data for our report ‘Minnesotans on the Move to Lower Tax States 2016’, we found that the top five states Minnesotans move to are Florida, Arizona, Texas, Colorado, and California. Wisconsin [which we also lose residents to] ranks 11th and we gain residents from Iowa, which ranks 48th. Our peer group is nationwide. Serious policy analysis has to involve more than just peeking over the neighbor’s fence.

But even with such a limited peer group, Mr. Kotz’ argument is contradicted by his own data.

He claims that, on his election in 2011, [outgoing] Wisconsin governor Scott Walker launched a “scorched-earth plan of hacking taxes” and that Wisconsin and Iowa practice something called “trickle-down conservatism”.

But he cites three bits of data relating to taxation – ‘Taxes for a family with a median annual income of $55,754’, ‘Property taxes on a median value $184,700 home’, and ‘State gas tax, per gallon’ – all of which show that Minnesota is the lowest taxed state of the three.

I’m sure that now you can understand why I was so amused and baffled by this bizarre bit of writing. Quite simply, it is totally incoherent.

The economic future of this state is an important topic. It deserves better analysis than Mr Kotz provides. If he disagrees with the findings of our report, I would ask him these questions; what does he think is the cause of our net loss of more productive workers? Why does he think Minnesota has less capital per worker than the national average? What does he think is responsible for levels of venture capital per worker which are 63% below the national average? Why does he think that the share of New and Young Businesses as a share of all businesses is lower in Minnesota than nationwide? What does he think is causing us to spend less on Research & Development as a share of GDP than the national average?

Leave the ad homs aside. These are the sort of questions we ought to be addressing. The folks at Schmitty’s might be interested to hear the answers.  

While declining to run our reply, the folks at City Pages do seem to have taken it on board. Here is how they tweeted this article before we submitted our reply…

And here is how they tweeted it after…

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