Forum editorial: ‘High-tax’ Minnesota is No. 1

BoxingThe following editorial was published on the Forum.com website on July 5, 2015:

Minnesota routinely has been classified by its neighbors – North Dakota and South Dakota – as a high-tax state that is business unfriendly. The Dakotas frequently have engaged in campaigns, both overt and subtle, to entice businesses to leave the Gopher State for the Dakotas, where, the mantra goes, business gets a better deal.

It’s not true, at least as measured by an outside assessment of Minnesota’s business climate that includes the state’s population and jobs growth, employee skill sets, and wage

scales that in most classifications are higher than in North Dakota and South Dakota.

That’s the conclusion of no less than CNBC, the cable TV business station that is required viewing for business leaders, investors and policymakers. The big factor in the report’s findings was that companies are more likely to locate or grow where they can find the largest supply of skilled, qualified workers, not necessarily where they can find the lowest taxes or highest incentives. By those criteria, Minnesota measures up as No. 1, knocking Texas from the top spot. North Dakota ranked a respectable sixth; South Dakota 11th.

The ranking might surprise those North Dakotans who use Minnesota as the “bad” example of high taxes and harsh regulation. But while North Dakota is enjoying the best economic period in its history, driven largely by energy development in the west, Minnesota’s economy is far larger and far more diverse, and always has been, despite the state’s tax structure and its regulatory practices. As the CNBC analysis confirms, other factors make the difference.

The uncertainties of agriculture and energy have always determined the strength or weakness of North Dakota’s economy. While there has been unprecedented economic diversification in the past few decades, particularly in Fargo and Bismarck, a collapse in oil country or a steep decline in commodity prices (some of both are happening) can have huge negative effects on the overall economy. Combine those factors with a small population that thus far does not have enough skilled and educated workers to fill thousands of good jobs, and the CNBC findings make sense. Minnesota’s population tops 6 million; North Dakota’s flirts with 700,000.

The rankings confirm that business growth is about more than low taxes. Job training and the amenities that higher taxes fund make a difference. North Dakota, with low taxes, does well. Minnesota, with higher taxes, does better.

Forum editorials represent the opinion of Forum management and the newspaper’s Editorial Board.

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