Study finds that Minnesota is losing $6.6 billion in investment to other states thanks to high taxes and labor shortages
The Minnesota Chamber of Commerce has produced its 2023 state of business retention and expansion in Minnesota report. Described as “an initial attempt to collect data and
insights on Minnesota’s business expansion trends,” it is based on “an online survey of 171 Minnesota businesses” and interviews with “over fifty businesses, economic developers and site selectors,” supplemented “with analysis of publicly available information on business expansions and private third-party data sources to track expansion activities and assess Minnesota’s performance relative to other states.” Its findings make for sobering reading, especially in light of the recent legislative session.
The report finds that:
While overall activity ticked up in Minnesota since 2021, the state consistently ranks near the bottom of Midwest states for new and expansion projects. Minnesota ranked 10th out of 12 states in the region in total projects from 2018 to 2022, and ranked 10th in projects per capita in 2022.
It also found that:
Minnesota lost three notable expansions due to regulatory barriers, totaling a combined loss of 350 potential new jobs and $1.2 billion in lost capital investment.
Data from fDi Markets shows that Minnesota based companies are expanding in other states at a higher rate than out-of-state companies are expanding in Minnesota. Since 2020, Minnesota had a net investment deficit of 54 projects, 2,500 jobs and $6.6 billion in capital expenditures.
Which states are we losing out on investment to?
Minnesota companies are investing most heavily in Florida, Indiana, Colorado and Texas, with those states receiving $4.6 billion in capital investments from Minnesota companies from 2020—2022. Additionally, Minnesota had a net investment deficit with each of its neighboring states so far this decade, with Minnesota-based companies investing $562 million more in neighboring states than companies from those states invested in Minnesota projects.
This ought to be another nail in the coffin of the “robust growth” myth.
Why is Minnesota performing relatively poorly?
Survey respondents ranked Minnesota’s high state tax rates and lack of available workers as the top two barriers that prevented businesses from expanding in Minnesota. Businesses and site selectors described that overall business climate and hiring issues have led some companies to expand outside of Minnesota in recent years
None of these problems will have been helped by the results of the recent legislative session, although, in fairness to the DFL, they didn’t even pretend to have any interest in growing the state’s economy. Sadly for the state, the recent session will only make the problems diagnosed by the Chamber’s report worse.
Taxes, already high, have been hiked by $10 billion over the next four years. Businesses have been lumbered with ludicrous new tax reporting requirements. Every worker will face a new payroll tax to fund paid family and medical leave, wiping out any existing arrangements you might have. The average Minnesotan will, in fact, face higher taxes after this session than they did before it. These taxes, we know, will continue to fuel the flight of Minnesotans out of the state, exacerbating that labor shortage.
“Elections have consequences,” as someone recently said. Here they are.