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ALEC report: Minnesota is 5th least economically competitive state

(The Center Square) – Minnesota is the fifth least economically competitive state in the nation, according to the American Legislative Exchange Council.

ALEC’s Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index, released Monday, compares its forecast of states across 15 economic policy variables.

Minnesota’s ranking slipped again this year. It went down from a 41st ranking overall in 2019 to 45th in 2020 and 46th in 2021.

The state performed best in its debt service as a share of tax revenue (4.86%, 14th overall), followed by its sales tax burden ($19.97 per $1,000 of personal income, 16th overall).

However, it ranked in the bottom 10 for top marginal personal income tax rate (9.85%, 45th overall), top marginal corporate income tax rate (9.80%, 45th overall), personal income tax progressivity (change in tax liability per $1,000 of income: $20.27, 45th overall) and remaining tax burden ($23.28 per $1,000 of personal income, 43rd overall) variables.

Levying estate/inheritance tax and not being a right-to-work state (option to work or support a union) brought in two 50th overall rankings.

Minnesota performed more closely to average for property tax burden ($29.93 per $1,000 of personal income, 29th overall), full-time public employees per 10,000 of population (538.8, 31st overall), state liability system survey (tort litigation treatment, judicial impartiality, etc. 70.7, 20th overall), state minimum wage ($10.33, 30th overall), average workers’ compensation costs ($1.61 per $100 of payroll, 34th overall), and number of tax expenditure limits (0 “least/worst” of 3, 32nd overall).

Utah ranked first in the nation, followed by North Carolina and Arizona.

Utah has ranked first for the past 15 years. It is a right-to-work state that does not levy estate/inheritance taxes. Its minimum wage is at the federal floor ($7.25). Worker compensation costs are $0.85 per $100 of payroll. Except for sales tax burden ($25.18 per $1,000 of personal income, 34th overall), it ranks above average in the other variables.

The North Star State fared better in economic performance, coming in 23rd. It had the 21st highest state gross domestic product cumulative growth from 2010 to 2020, 36.29%, and the 27th highest domestic in-migration from 2011 to 2020 (down 33,278). Minnesota’s cumulative 2010 to 2022 non-farm payroll growth, 3.66%, is the 28th highest in the nation.

Arizona beat Utah for first place in this ranking. Florida, Idaho and Washington followed those states; ranking third, fourth and fifth, respectively. Arizona has the seventh-highest state growth in gross domestic product, the third-highest absolute domestic in-migration and the third-highest non-farm payroll.

FreedomWorks economist Stephen Moore and ALEC Chief Economist Jonathan Williams said in the report the study has impacted state policymakers’ decisions.

“This is a magic moment for tax reform at the state level,” he said. “I think even in some of these blue states that have been traditionally very liberal, they’re looking at reforms that could really make their states more prosperous. I think the direction is good, and I think a lot of that direction is a result of the Rich State, Poor State rankings.”

ALEC CEO Lisa Nelson said the report shows free-market ideals benefit taxpayers and predict change.

“People are voting with their feet,” she said. “They’re headed to opportunity states.”

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