Economic Report: Minnesota Faces “Substantial Challenges” Unless Lawmakers Lower Taxes

Phelan and Scattergood find that Minnesota’s economy is “hard working but low productivity” that lags in many metrics. The reason? High taxes.

A new economic report paints a concerning picture for Minnesota if lawmakers don’t lower taxes and ease the regulatory burden on hardworking Minnesotans.

The Center of the American Experiment released their annual State of Minnesota’s Economy on Tuesday. The report, written by John Phelan and Andrew Scattergood, analyzes the key metrics driving Minnesota’s economy and identifies the areas that must be addressed in order to make the state more competitive.

Phelan and Scattergood find that Minnesota is a “hard working but low productivity” economy that lags in many metrics. The reason? High taxes.

“Policies from state lawmakers designed to tax Minnesota’s residents even more are exactly what our state does not need,” Phelan and Scattergood write.

A key element to growing Minnesota’s economy long-term is retaining the state’s skilled workers while also attracting new ones — something that requires thoughtful economic policy. However, as the report states, Minnesota’s economic policies “run in the opposite direction” and high taxes have residents fleeing Minnesota for other states.

“It is not just ‘the rich’ who are taxed heavily; Minnesota’s lowest tax rate is higher than the highest tax rate in 23 states,” Phelan and Scattergood write. “As a result, the state loses residents in every income category over a modest $25,000 annually.”

In addition to the excessive rates of personal taxation, the report also finds high rates of business taxation as a factor detering investment, entrepreneurship, and small business formation.

“To boost the productivity of Minnesota’s workers so they can generate more output and enjoy the higher standards of living they deserve, these policies need to change,” Phelan and Scattergood conclude. “Until then, our economic performance will remain unimpressive.”

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