There’s more to a booming economy than taxes

Forum Communications is a fairly conservative media outlet whose editorials and endorsements have mirrored the tax policies of the Republican Party.

So it wasn’t insignificant yesterday when the company’s editorial in the Fargo Forum acknowledged when it comes to business, Minnesota — long painted as the anti-business state — has it over North Dakota.

And, it said, there’s more to an economy than taxes.

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.

The wake-up call was provided by CNBC, which last month declared Minnesota the No. 1 state for business in the nation.

The survey also acknowledged that the quality of the worker is more important.

To some degree, Minnesota benefits from a trend that we have sought to reflect in our study this year. Rather than just seeking the lowest taxes or the highest incentives, companies are increasingly chasing the largest supply of skilled, qualified workers. So states are touting their workforces like never before, giving the Workforce category—where Minnesota finishes a respectable 13th—greater weight in our study.

But Minnesota doesn’t just stumble into the top spot by accident. The state’s path to the top is marked by a carefully crafted and still controversial strategy by Gov. Mark Dayton, the first Democrat to hold the office in two decades. The hallmark of his plan is something most governors seeking to win the hearts of business would never dream of: a big tax increase.

Coincidentally, today’s Star Tribune editorial dismisses the CNBC study to the extent that its conclusion has little to do with the reality of the way the state addresses its transportation needs.

Republicans who now boast about “stopping the gas tax” bring to mind Oscar Wilde’s biting comment that some people know “the price of everything and the value of nothing.” But DFLers have explaining to do, too. They squandered an opportunity to act in 2014 when they enjoyed a majority in both houses. And the tepid support offered by Gov. Mark Dayton and the current Minneapolis mayor and her predecessor for the Southwest light-rail line has seriously damaged transit’s momentum. None of this is good news for the state’s economy going forward.

Not all states are so paralyzed by transportation politics. Twelve — nine of them with Republican governors and legislatures — passed major packages this year. Seven of those nine Republican states raised or expanded the gas tax. It’s not a perfect revenue source, to be sure. But without cannibalizing other government functions, a restructured gas tax is the fairest, most plausible way forward.

It’s interesting to note that while the Minnesota Legislature dithered over a few pennies per gallon, the market raised gasoline prices by a whopping 75 cents between January and June — with nary a ripple of complaint. Apparently, a market-driven price hike is OK even though the public gets nothing for it, but a slightly higher tax is abhorrent even if the public gets better roadways in return. Go figure.

“Minnesotans, starting about 50 years ago, pulled together to transform a mediocre state into an exceptional one,” the Strib said of the path to the high CNBC ranking, while decrying what it called “the politics of ‘no’.”

Related: Minnesota economy beats Wisconsin: 7 charts, 1 table

  • jon

    So We have a Democrat as the gov. And by all measures MN is doing ok (perhaps even the best) but it seems worth noting that #2 on the list from CNBC is Texas. They do not have a democrat for their gov, nor are the dem’s in control of either chamber down there, nor have they been for a great many years…

    • John

      Perhaps states do well in spite of the political allegiance of their leaders, and not because of it.

      I would say that MN and TX have this in common: Lots of resources to draw on, and a long history of doing that. Be it mining, logging, cattle ranching, medical devices, or other stuff, both states do some things that create business well.

  • MrE85

    I’ve spent a fair time in both states, and I would have to say that MN does a better job of re-investing in itself than North Dakota does.

    • Jack

      Just wait until the oil runs dry. In and. Then how will they be fairing. Diversification is important.

      • MrE85

        Health care is booming there, and the North Dakota economy is more diversified than you might think — especially on the eastern side. On the western side, oil and gas pretty much dominate everything.

        • Jack

          I stand corrected.

  • lindblomeagles

    First off, CNBC and North Dakota are HIGHLY CORRECT AND QUALIFIED TO DO THE STUDY. The only low tax state in the United States that is more favorable currently than Minnesota or any other high tax state, is Texas. A case could be made for Florida, but there isn’t any big jump, population wise OR business wise, in most of the country’s low/no tax states, especially the Southern ones. Your best bets are still New York, Texas, Illinois, Virginia, Washington, and yes, California – despite all of its problems. Second, the Strib was pro-Southwest Line, as I am, and made LARGER LEAPS WITH LESS INFORMATION than CNBC because they aim to persuade Minnesotans to support Southwest LRT. CNBC is trying to persuade anyone. I’m certain THEY were surprised at just how productive Minnesota truly is. Just because someone is homegrown (the Strib), doesn’t make that person all-knowing.