With big changes coming in the White House, Congress, and the Minnesota Legislature, it’s anyone’s guess what the new year will look like in Minnesota and around the country.

At the Minnesota Chamber of Commerce’s annual summit on Wednesday, local leaders gathered at the McNamara Alumni Center to look back at the state’s past economic performance for clues into the future.

As in prior years, the chamber released its annual Business Benchmarks report, which digs into a range of economic indicators across the state. Many of those figures came from 2023, though a few originated from data within recent months.

Overall economy

While the report showed several positive economic signs in Minnesota, the chamber’s Beth Kadoun told attendees that the state is “not reaching its economic potential.”

Kadoun, who serves as VP of tax and fiscal policy, said that Minnesota is behind the national average in terms of economic economic growth. The national average of GDP growth in 2023 was 2.9%, but in Minnesota, the same rate was 1.6%. That put the state 40th in the nation.

Kadoun noted that Minnesota exported $25 billion worth of agriculture, mining, and manufacturing products to nearly 200 countries in 2023. Despite this number, Minnesota saw an 8% reduction of exports overall. The national reduction rate was 2%, but Kadoun said Minnesota is back on an upward trend.

The workforce

According to the report, Minnesota is ranked second best in terms of laborers with bachelor’s degree or higher. Kadoun said Minnesota has an intelligent and hard-working workforce, and added that Minnesota has the fifth most diverse industry base for businesses.

Job growth, meanwhile, has been positive but is also lagging, Kadoun said. Employment grew as Minnesota saw 33,000 jobs gained in 2023. Government jobs grew by 4.2% whereas the national average was 2%.

Where else did Minnesota jobs grow or decline? The report said that health care and education jobs increased, though there were losses in construction, manufacturing, and professional and business services.

Taxes

Kadoun said taxes remain a top concern for businesses in Minnesota as the state has the ninth highest state and local taxes per capita. Minnesota also has the highest corporate tax rate in the nation at 9.8%, according to the report.

“As other states have used budget surpluses to lower taxes, Minnesota continues to raise these costs, placing the state at or near the top of several categories, including the corporate income tax, where Minnesota now has the number one rate in the nation,” the report stated.

There was also an uptick in state and local sales taxes, which hit an average of 8.12%. That put Minnesota 15th highest in the nation in that category. Minnesota’s gas taxes ranked 30th in the nation, while the cost of living ranked 21 in the nation.

Meanwhile, Minnesota’s income tax is at 9.85%, the sixth highest in the nation. Kadoun said Minnesota’s income tax system is one of the most progressive in the nation.

On the positive side, Minnesota is still ranked first for the five-year survival rate for new businesses.

Education

Despite Minnesota’s workforce normally having a strong educational background, Kadoun noted that test scores have been decreasing.

In 2013, Minnesota was 11th best for fourth grade reading but is now 25th in the nation. Minnesota was fourth best in 2013 for fourth grade math and is now 14th in the nation. Students’ test scores dropped after the start of the Covid-19 pandemic, and have not picked back up.

Kadoun said Minnesota’s declines in this area are significant compared to the rest of the nation.