“We’re in a situation where it becomes very convenient to increase the number of people there, and it’s going to go up over a period of the next few months,” Larson said in May.
Lobbying Dayton didn’t work
Since Digi-Key, like Marvin, is what is called a subchapter S corporation, its earnings must be reported on the personal income statements of the shareholders. Larson and Digi-Key owner Ron Stordahl unsuccessfully lobbied Gov. Mark Dayton more than a year ago not to raise the top income tax rate, and got no assurances that a proposed 4 percent surtax on the rich won’t eventually happen.
“We could have over 100 people walk in the door today and we’d hire them, but now we’re saying, yeah, that’s fine, but do we want to hire them here?” Larson said.
Peterson at the North Dakota chamber argues that the west bank of the Red River is outperforming the east bank, and there’s some evidence he’s right. North Dakota counties on the border with Minnesota posted 18 percent job gains over the past decade, while neighboring Minnesota counties grew 1.7 percent.
That’s mostly because Fargo is trouncing its sister city, Moorhead. Fargo’s Cass County has added 21,424 jobs in the past 10 years, while Moorhead’s Clay County has added 912. That’s 25.2 percent growth compared to 5.4 percent.
Along the South Dakota border, job growth on the west side has been a more modest 7.1 percent over the past 10 years, while neighboring Minnesota counties have lost jobs at a rate of 1.3 percent.
Marvin Windows now employs about 500 people each at factories in Fargo and Grafton, N.D., where the company started new lines of business that have since grown.
“Do the tax decisions impact our decision on where we expand?” said Vice President of Operations Brian Johnson. “I think possibly in the long term it’s a contributor, but it’s not evident in any of our short-term decisions. It’s one of many things we consider.”
How big a threat?
Minnesota’s economy doesn’t hinge on its rural western counties, said Ann Markusen, a regional economist and former professor in the University of Minnesota’s Humphrey School of Public Affairs.
The Twin Cities has a big, diverse economy with well-developed advertising, publishing, financial, food, retail, shipping and high-tech manufacturing industries. These companies draw smart young people from the Dakotas, not the other way around.
“These are things that no place in North and South Dakota have,” Markusen said. “I always think our competitors nationally are Seattle, Portland to a lesser extent, and Denver.”
The reason for Minnesota’s economic strength is the quality of its workforce, the very thing its neighbors covet, said Art Rolnick, a former economist at the Federal Reserve Bank of Minneapolis who is now at the Humphrey School.
Minnesota doesn’t bill itself as a low-tax state, as businesses like Digi-Key are painfully aware, yet its economy grew by 3.5 percent last year.
That doesn’t match North Dakota’s 13.4 percent, but it’s still fifth-fastest in the nation. Minnesota’s per capita income remains in the top 10, and unemployment is two points below the national average.
“We’ve won,” Rolnick said. “Look at our economy — it’s one of the best in the country.”