Minnesota Loses the Race to the Bottom – And Wins

Isaiah J. Poole

CNBC, the business porn channel for one-percenters, released the results of its latest ratings of “top states for business” and, to its barely disguised surprise, it was not Texas, Wisconsin, Louisiana, Florida, or any of the other states where Republican governors and conservative legislatures have cut government spending, lowered taxes on the wealthy and moved to weaken unions.

Instead, it was union-friendly, tax-and-spend Minnesota.

“Minnesota scores 1,584 out of a possible 2,500 points, ranking in the top half for all but two of our 10 categories of competitiveness,” CNBC reported. The report hastened to add that “what may be most instructive are the categories where Minnesota does not do well. Both involve cost.”

What Minnesota “does not do well,” in CNBC’s view, is keep tax rates obscenely low for its richest corporations and wealthiest residents. Gov. Mark Dayton, a Democrat, came into office in 2011 facing a $6 billion deficit. Two years later, he pushed through a $2 billion tax increase, mainly on the top 2 percent of income earners and on smokers. He has since cut taxes on middle-class families, but kept the top tax rate at 9.85 percent, among the highest in the nation.

Dayton took the revenue and invested it in the state’s schools, in improving transportation and other infrastructure, and in measures that lifted the quality of life for the state’s residents. In short, he has followed a basic progressive economic model – ask businesses and the wealthy to pay their fair share to support the fundamentals of a shared-security economy, such as quality education. And Dayton is proving the model works.

“We’re not a low-tax state. We’re a high-value state,” Dayton said in an interview with CNBC, adding that for businesses “the bottom line is profitability, and Minnesota businesses do very well” because of the state’s investments in such areas as education.

“Never since we began rating the states in 2007 has a high-tax, high-wage, union-friendly state made it to the top of our rankings. But Minnesota does so well in so many other areas—like education and quality of life—that its cost disadvantages fade away,” CNBC says, noting that businesses are not just seeking “the lowest taxes or the highest incentives,” but also skilled workforces and good overall quality of life. CNBC ranks Minnesota’s schools second-best in the country, while Texas, which CNBC ranks as second most business-friendly state on the strength of its low taxes, ranks 28th in education and 33rd in quality of life.

Delving into the ratings, It’s worth noting that among the states that were ranked in the top 10 in the “cost of doing business” category, only one, Arkansas, ranked in the top 20 for workforce; only two, Iowa and South Dakota, ranked in the top 20 for quality of life; and only three, Kentucky, South Dakota and Oklahoma, ranked in the top 20 in infrastructure.

There are a lot of factors that go into making a state both a good place to live and a good place to do business. But conservative dogma dictates that a sure-fire way to kill a state’s economy is raise taxes and then spend the revenue on an activist government. Minnesota stands as a defiant counter to that dogma. A state does not have to win the race to the bottom on taxes, government spending and worker empowerment to come out on top.

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