Minnesota vs. Michigan

Added June 18th, 2014 by Judy Putnam | Email This Entry Email This Entry
Judy Putnam

Michigan and Minnesota certainly have a few things in common – both are “M’’ states in the Great Lakes region, both enjoy Lake Superior shorelines and a border with Canada. But a new report paints two very different pictures when it comes to taxation, spending and their economies.

State Policies Matter: How Minnesota’s Tax, Spending and Social Policies Help it Achieve the Best Economy Among Great Lake States, was written by Michigan journalist Rick Haglund for Michigan Future, Inc. It looks at why Minnesota enjoys one of the healthiest economies in the country while Michigan continues to struggle.

Minnesota is the wealthiest Great Lakes state and has the 11th highest per capita income in the country while Michigan trails 34 other states in income. The jobless rate in Minnesota was at 4.6% in December, compared with 8.4% in Michigan.

The report ties Minnesota’s higher revenues and higher investments to its prosperity. Per capita state and local taxes in Minnesota are $5,016 – $1,361 higher than in Michigan. State and local taxes are 11.9% of personal income in Minnesota; 10.6% in Michigan.

And spending per capita is higher in Minnesota, too, with the notable exception of corrections. Michigan spends $202 per capita on corrections, more than double Minnesota’s $91 per capita.

Source: Michigan Future, Inc.

“Minnesota’s sustained, strong economy defies the conventional wisdom that low taxes are the singular path to prosperity,’’ the report concludes. “The state’s taxing and spending priorities reflect Minnesota’s long-held belief that support for education from preschool to the university level, and high-quality government service are key ingredients in producing prosperity of its citizens.’’

In 2013, Minnesota increased taxes on businesses and wealthy people in response to a deficit. In 2011, Michigan cut business taxes and essentially cut taxes for wealthy people (while increasing taxes for seniors and working families earning the least). Minnesota invested in education. Michigan cut funding for education.

“The impact of those differences in a nutshell: the Minnesota tax boost will help fund additional spending on higher education,’’ according to the report.  “Meanwhile, state support for Michigan universities today is lower than it was in 2010.”

Minnesota is a far better state model than Indiana, the report concludes. While many conservatives praise Indiana’s “low-tax, small-government, anti-union philosophy,” the report notes that “the Indiana model has not been a path to prosperity for its citizens.’’ In fact, Indiana ranked 39th for per capita income in 2012, sliding from 27th two decades ago.

Another plus for Minnesota is a welcoming attitude toward gay people and immigrants.

“Minnesota has made those necessary investments and enacted policies making the state welcoming to all. It really shouldn’t be surprising, then, that it has the strongest economy in the Great Lakes region and one of the most vibrant in the country.’’

Michigan would do well to pay attention to the lessons learned in Minnesota.

— Judy Putnam


One Response to “Minnesota vs. Michigan”

  1. […] the need for Michigan to invest in the things that will grow our still-struggling economy. Michigan Future looked at Minnesota’s willingness to raise the revenue needed to pay for education and other […]

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