Fiscal Policies Hurt MN’s Rank in Economic Outlook Report

Fiscal Policies Hurt MN’s Rank in Economic Outlook Report

Minnesota’s tax rates and other fiscal policies ranked the state among the worst in the country in a new economic-outlook report, which was produced by a group that advocates for free-market enterprise and limited government.

Minnesota fared poorly in a recent report that is meant to gauge economic outlook based on public policy measures, including tax rates, regulatory burdens, and labor policies.

It performed better, however, based on its actual economic performance during the past decade.

The report, called “Rich States, Poor States,” is produced annually by the American Legislative Exchange Council (ALEC), a group of state legislators and business leaders that advocates for traditionally conservative principles including free-market enterprise and limited government.

The report’s economic outlook ranking is described as a “forward-looking measure of how each state can expect to perform economically based on 15 policy areas that have proven, over time, to mean greater economic success.” The ranking takes into account measures such as a state’s minimum wage, property tax burden, and personal and corporate income tax rates.

On that front, Minnesota ranked fifth from last among states, beating out only California, Illinois, New York, and Vermont. Minnesota slipped five spots from last year’s report, when it ranked 41st.

Topping this year’s list were Utah, North Dakota, South Dakota, Wyoming, and Virginia.

Minnesota fared better, however, in the report’s “economic performance rank,” which is based on how well the state’s economy performed during the past decade across three measures: gross domestic product, domestic migration, and nonfarm payroll employment. Minnesota ranked 34th among states on that measure.

To view the complete report—which was authored by economist Arthur Laffer, Wall Street Journal senior economics writer Stephen Moore, and Jonathan Williams, director of ALEC’s Center for State Fiscal Reform—click here. For Minnesota-specific data, click here.

Laffer said in a statement that the report is “intended to be a resource for state lawmakers, citizen groups, and all those who are interested in learning how to improve the economic health of their state.”

Neighboring states have long touted what they describe as more business-friendly environments, and they have recently ramped up efforts to lure Minnesota businesses and workers.

For example, the Greater North Dakota Chamber recently launched a campaign that promotes its business climate at Minnesota’s expense, mocking Minnesota’s tax policies and drawing criticism from some local politicians. (Just prior to the close of this year’s legislative session, Minnesota lawmakers on Monday passed a $2.1 billion tax bill, which, among other things, raises taxes for the wealthiest Minnesotans.)

And earlier this month, South Dakota Governor Dennis Daugaard visited the Mall of America to personally discuss career opportunities with potential transplants. He visited with shoppers, answering questions about career possibilities in the state, and encouraging Minnesotans to consider relocating to South Dakota.

Twin Cities Business produces a quarterly economic indicator report that, unlike ALEC’s Rich States, Poor States study, is based on input from hundreds of Minnesota business leaders. Minnesota business leaders’ optimism increased last quarter, as companies planned to increase hiring and capital expenditures, although they indicated that a shortage of qualified talent may slow the pace of growth. It’s yet to be seen whether recent activity at the state legislature will influence next quarter’s outlook; many business leaders said last quarter that they were concerned about increased taxes and regulation or other pressures from government.