Minnesotans are willing to pay more taxes for more prosperity

[detlump]

In Crains today, a report by Michigan Future Inc discusses the higher taxes that Minn residents pay that is supposedly linked to more prosperity.

For example, in 2012 the per capita income was almost $10K more per year in Minn than Mich, the unemployment rate was 4.6% vs 7.3%.

Business taxes, state and local taxes, as well as sales taxes are all higher in Minn than Mich.

It sounds counter-intuitive, that higher taxes would lead to more growth, less poverty, less unemployment.

Can this info be accurate or somehow parlayed into improving Michigan?

http://www.crainsdetroit.com/article...tpace-michigan

[Hermod]

Sure., enact a 20% income tax on all income in Detroit and watch the money pour in to the city coffers plus prosperity will reign and everyone will have a job paying $60K a year.

[davewindsor]

In Crains today, a report by Michigan Future Inc discusses the higher taxes that Minn residents pay that is supposedly linked to more prosperity.

For example, in 2012 the per capita income was almost $10K more per year in Minn than Mich, the unemployment rate was 4.6% vs 7.3%.

Business taxes, state and local taxes, as well as sales taxes are all higher in Minn than Mich.

It sounds counter-intuitive, that higher taxes would lead to more growth, less poverty, less unemployment.

Can this info be accurate or somehow parlayed into improving Michigan?

http://www.crainsdetroit.com/article...tpace-michigan

I can't read the whole article because there is a members only block from the Canadian side and you didn't cut and paste it, but my guess is that Minnesota had a lot more economic momentum than Michigan prior to 2012 when they had a Republican governor. Now the Democrats are putting on the economic brakes with higher taxes, but it's still further ahead from the prior government and will take a while to adjust. Give it a few more years and we'll see how those higher taxes turn out for them.

[DetroiterOnTheWestCoast]

Or follow Kansas, slash taxes, explode the budget, and see a recovery falter compared with all your neighbors. As long as the tax cuts benefit the highest earners, declare victory

[Detroitnerd]

Sure., enact a 20% income tax on all income in Detroit and watch the money pour in to the city coffers plus prosperity will reign and everyone will have a job paying $60K a year.

How did you manage to write a whole post about taxes without using the word "gummint"?

[animatedmartian]

It sounds counter-intuitive, that higher taxes would lead to more growth, less poverty, less unemployment.

It's counter-intuitive if the state hoards the revenue generated from higher taxes.

Higher taxes mean more to spend. In 2013, per capita spending in Minnesota was $4,443, compared with $2,813 in Michigan. Minnesota spent $242 per capita on higher education, compared with $172 for Michigan, and spent $2,067 per capita on K-12 spending, compared with $1,447 in Michigan. Minnesota spent $1,134 per resident on health and human services in 2013, compared with $617 in Michigan, and $502 per resident on transportation, compared with $223 in Michigan.

Road improvements and repairs are funded by a tax of 28.6 cents a gallon in Minnesota, compared with repairs funded by 19 cents a gallon in Michigan.

As for individual taxes, Minnesota's income tax rate varied between 5.35 and 9.85 percent, while Michigan's was a flat 4.25 percent; sales taxes ranged between 6.875 and 7.875 percent in Minnesota, compared with 6 percent in Michigan; and the corporate income tax was 9.8 percent there and 6 percent here.

It's a self-feeding cycle; better services means more businesses which means higher taxes which means better services. Low taxes only can do so much to lure businesses. If the infrastructure and education is crap, then businesses [[especially those that require a well-educated workforce) will pass over a low tax state for the one with better services and better workforce.

If the state is generating revenue, but never invests back into those services, then the economy pretty much stagnates and at some point people are going to want to move out of state to find better jobs [[as what has mostly been the case in Michigan).

Obviously, too high of taxes too quickly will drive businesses out just as well, but low taxes are not the end all solution to luring businesses either.

[nain rouge]

I'll harp on my point from another thread and say that if you have a poor climate, you have to invest in quality urban and suburban environments. If you look at the stats, the only economically successful low tax states have warm weather. And it makes sense. All things equal, why would you pick an area with bland or ugly neighborhoods and a bad climate over an area with bland or ugly neighborhoods and a good climate? But no, we think 15 Mile & Dequindre will sell to outsiders....

[Detroitnerd]

It's amazing how resistance hillbillies get to paying taxes when the state has one big majority-minority city.

[iheartthed]

I'll harp on my point from another thread and say that if you have a poor climate, you have to invest in quality urban and suburban environments. If you look at the stats, the only economically successful low tax states have warm weather. And it makes sense. All things equal, why would you pick an area with bland or ugly neighborhoods and a bad climate over an area with bland or ugly neighborhoods and a good climate? But no, we think 15 Mile & Dequindre will sell to outsiders....

I think investment has a lot more to do with it than weather. With the exception of California, all of the highest earning states are in cold weather locations. There is probably a higher correlation between taxes and prosperity than climate and prosperity.

[animatedmartian]

I'll harp on my point from another thread and say that if you have a poor climate, you have to invest in quality urban and suburban environments. If you look at the stats, the only economically successful low tax states have warm weather. And it makes sense. All things equal, why would you pick an area with bland or ugly neighborhoods and a bad climate over an area with bland or ugly neighborhoods and a good climate? But no, we think 15 Mile & Dequindre will sell to outsiders....

There's no such thing as a good climate. The Southeast is humid as a monkey's butt during the summer and the Southwest is as dry and arid as the Sahara. Not to mention massive droughts in recent years.

Also, quite a few southern states handout a lot of subsidies to lure businesses. In that sense, those states have a good business climate, but it has nothing to do with weather.

[Wesley Mouch]

I think investment has a lot more to do with it than weather. With the exception of California, all of the highest earning states are in cold weather locations. There is probably a higher correlation between taxes and prosperity than climate and prosperity.

Weather not doubt has something to do with prosperity. One strives for prosperity more when you need to pay the heating bill than when sitting on a beach in Mexico.

However I don't think the climate mattered. What mattered was history and transportation. US Wealth was from european trade initially. Ports mattered. St. Lawrence mattered. Canals mattered. As time went on, Railroads mattered. Waterways and rail lines probably tell the story more than climate.

Why north and not south? Closer to Europe. Closer to where we landed [[well not my 20thC immigrant family). Industry required people, and required water. You could find some water down south -- but water comes from snow. And snow is cold.

[nain rouge]

There's no such thing as a good climate.

Right, all of those retirees move to Florida and Arizona because of the good business climates.

Think with your head here. How do areas like New York, Boston, and Minneapolis do so well? By offering dynamic urban neighborhoods, which in turn tend to lead to more dynamic suburbs. Why would the average person want to live somewhere that has MASSIVE urban decay and crappy weather, particularly when there's a plethora of better options? Most of the South is just Michigan with better weather, and the results speak for themselves.

Perhaps you didn't know this, but Michigan is infamous for generous - and failed - business subsidies. Even the Wall Street Journal wrote about it. While we gave out all that money to companies like Dow and GM, most of our big cities rotted out from disinvestment. How has that worked out for us?

[animatedmartian]

Right, all of those retirees move to Florida and Arizona because of the good business climates.

What do retirees have to do with corporations?

[ABetterDetroit]

I will say it again and keep on topic. Minnesota has low property taxes AND a graduated income tax. Go figure! They want the property in the state to remain valuable and follow the lead of the richest taxman in world history. That alone speaks volumes about their tax intelligence.

http://www.taxpolicycenter.org/Uploa...erty-Taxes.pdf

[nain rouge]

What do retirees have to do with corporations?

The two concepts can be related using sarcastic comments?

[oladub]

Gasoline taxes per gallon-

Michigan $.598
Minnesota $.47

Michigan's largest employers
http://www.crainsdetroit.com/assets/PDF/CD9296226.PDF
MN's largest employers
http://tcbmag.com/Lists-and-Research...l&djoPid=18824

Michigan is spending money to bail out Detroit while MN just opened up a new light rail line between the Twin Cities. Raising taxes is one part of the equation. What those taxes buy is another.

[ABetterDetroit]

You are aware that 6% of all fuel charges are sales taxes that go directly to schools and not 1 dime of that money goes to roads or public transport. The fuel tax is fixed at 19 cents per gallon so as the fuel price rises all extra money goes to schools not mdot. There're only two states that charge sales tax on gasoline

[313WX]

There's no such thing as a good climate. The Southeast is humid as a monkey's butt during the summer and the Southwest is as dry and arid as the Sahara. Not to mention massive droughts in recent years.

Also, quite a few southern states handout a lot of subsidies to lure businesses. In that sense, those states have a good business climate, but it has nothing to do with weather.

While an individual climate preference is subjective, many more people seem to disagree with you. Tons of retirees for example move to the southeast and southeast every so often simply because of the weather.

But in any event, I agree with what nain rouge said. The "Pure Michigan" collectivist mindset can only get the state so far in terms of being a healthy and attractive place to live or do business.

[animatedmartian]

While an individual climate preference is subjective, many more people seem to disagree with you. Tons of retirees for example move to the southeast and southeast every so often simply because of the weather.

The part that confuses me is how corporations are in anyway similar to the motivations of retirees. Most corporations exist in huge air conditioned buildings and while warmer weather might be the enjoyable climate of its employees, I don't think GM would make record breaking profits just because there were more sunny days.

[313WX]

The part that confuses me is how corporations are in anyway similar to the motivations of retirees. Most corporations exist in huge air conditioned buildings and while warmer weather might be the enjoyable climate of its employees, I don't think GM would make record breaking profits just because there were more sunny days.

But see, it is about the people who work for these corporations.

A corporation will have to consider if the people they want to attract will actually want to live in the climate where they're based. How many companies do you think would be able to recruit competitive talent if they were based in a place like Alaska?

Besides that, for all of the productivity lost in Michigan during the snowy months or the extra money spent to heat buildings for their employees on cold winter days, that same productivity can be gained and that save money can be saved in a state that has less active weather and is warmer.

And the GM example is different. Michigan, since Henry Ford pioneered the auto industry here, has always been home to the talent auto companies want to hire. It's pretty much a case of homerism.

[emu steve]

I can't read the whole article because there is a members only block from the Canadian side and you didn't cut and paste it, but my guess is that Minnesota had a lot more economic momentum than Michigan prior to 2012 when they had a Republican governor. Now the Democrats are putting on the economic brakes with higher taxes, but it's still further ahead from the prior government and will take a while to adjust. Give it a few more years and we'll see how those higher taxes turn out for them.

I've somewhat followed Minnesota for decades.

It has been probably the best state in the union in terms of social indicators, e.g., crime, education, employment, etc. etc.

It has always been a state which has freely spent and has minimal social problems. No short term effects here.

I don't see an issue with taxes, etc. The big thing is I don't believe Minnesota ever suffered from 'de-industrialization' which has killed MI, OH, etc. with the loss of jobs such as autos, steel, glass [[e.g. Toledo), etc. Also electronics, shoes, clothing, etc. etc. have hurt other parts of the country.

Hawaii might also be a similar state to MN.

As I recall the 'employment history' of MI, many, many workers migrated to MI from all over including the South for good paying industrial jobs. As the jobs left Dearborn [[e.g., Ford Rouge plan I believe had 30K workers at one time), Flint, Saginaw, etc.) it left behind economic hardship [[i.e., folks who lost good paying jobs. Take a job away and take away a person's survival and sense of self-worth). Flint used to be a high income city before it went to hell when automobile plants left.

I think it might have been Steve Rattner who said that the 00's [[2000s) we lost about 5M industrial jobs which have NOT come back [[we've regained about 500K).

If those God-fearing, flag waving "patriotic" corporate owners, would bring back those 5M good paying jobs home the United States would be riding high today.

We gave away 5M jobs so that we could import products produced by low wage foreign 5M employees at such cheap prices. Someone can buy a computer thumb drive [[say 5 -8 GB) for the price of two Starbucks coffees and a Danish roll.

That's it in a nutshell!!

[emu steve]

MN used to view itself as the most liberal state in the nation and prided itself of how well governed the state was.

Walter Mondale pretty well epitomizes the liberal politicians of MN from days gone by.

In other parts of the country [[e.g., Northern Va.) Arlington County, Fairfax County, etc. are very liberal and are proud of their reputations as being very, very well governed counties. [[folks in Arlington jokingly refer to themselves as the "Peoples Republic of Arlington").

BTW, Fairfax County has about 1.1M residents which is more than a number of states. Fairfax is no small hamlet.

But Arlington, Fairfax, etc. are non-industrial areas which never really suffered from globalization [[they didn't produce good which could be made over seas) and hence has excellent employment, education, low crime, etc.

Crime, poverty, etc. aren't exactly random events. They occur in areas of low educational attainment, high unemployment, etc. etc.

Even Washington, D.C. has seen a very large influx of younger, higher educated workers has seen huge drops in crime [[e.g., murder) over the last 20 years as educational attainment, employment, incomes, etc. rise.

I tell readers here, D.C. is a text book example of how a large city with problems [[and yes D.C. was in bad shape a couple decades ago) can turn itself around. But the key is a very strong, growing employment base. Without jobs no city thrives.

[emu steve]

But see, it is about the people who work for these corporations.

A corporation will have to consider if the people they want to attract will actually want to live in the climate where they're based. How many companies do you think would be able to recruit competitive talent if they were based in a place like Alaska?

Besides that, for all of the productivity lost in Michigan during the snowy months or the extra money spent to heat buildings for their employees on cold winter days, that same productivity can be gained and that save money can be saved in a state that has less active weather and is warmer.

And the GM example is different. Michigan, since Henry Ford pioneered the auto industry here, has always been home to the talent auto companies want to hire. It's pretty much a case of homerism.

Lot of truth to your points.

Now that we've moved on from industrial to a 'knowledge' economy, a state like N. Carolina [[with a pleasant climate and a lot of top universities which compete very well with those in MI) can compete.

A startup corporation can set up in S.E. MI and pick up talent from UofM and other schools while a N.C. startup has access to Duke, UNC, NCSU, etc. talent.

[Hermod]

How did you manage to write a whole post about taxes without using the word "gummint"?

I like the word. It was often used by the characters in Walt Kelly's "Pogo" strip.

[MikeyinBrooklyn]

Demographically comparable areas with divergent tax rates inevitably see wide shifts in growth towards the lower-taxed area. Comparing Minnesota with Michigan is not really accurate, because the demographics aren't the same. Compare West Michigan with Minnesota, without the decimated [[in part, by high taxes) cities of Detroit, Flint, and Pontiac, and you will find a truer comparison.

It is not just weather that has caused large populations and jobs to flow south and west. The states that have [[by a wide margin) strong economic growth have very low taxes and light regulatory burden. Southern and western states [[although not so much California, Oregon, and Washington, which have lower econ growth rates than the Sunbelt) are in much better long term financial and economic shape. And, in our midwestern region, it is a real lesson that Illinois is both the highest taxed state and the one with the worst growth and it has statewide budget issues approaching Detroit's. Illinois' unfunded retirement obligations exceed NY and California combined. And don't forget the 60% [[60%!) "temporary" state income tax hike a few years ago. Illinois' taxes are the best thing that ever happened to job growth in Indiana.