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Continued: Schafer: Minnesota offers economic lessons for struggling Michigan

  • Article by: LEE SCHAFER , Star Tribune
  • Last update: June 28, 2014 - 2:00 PM

The Michigan report doesn’t shy away from showing what Minnesota’s spending costs the taxpayer. And to compare Minnesota and Michigan’s tax rates, including Minnesota’s 9.85 percent top marginal income tax rate that is more than double Michigan’s, is sobering.

To suggest that a nearly 10 percent top tax rate is somehow part of a clever strategy to grow the Minnesota economy is at least a debatable point. There’s been credible third-party research that has shown that high relative marginal tax rates can get people to pack up and leave.

Not so long ago, Michigan had some taxes that were so onerous that it’s hard to imagine any mainstream Minnesota politician supporting something similar here. But Michigan got rid of the worst of them, including business taxes on factors besides income to the owners.

It’s why Tricia Kinley, lead lobbyist for the Michigan Chamber of Commerce on tax and regulatory policy, said the Michigan Future report seems to be advocating a version of Michigan past and a return to policies that have been proven to be failures.

For Glazer, debating tax policy is far less important than what government does with the money. Is the public’s money invested in things that produce economic vitality? Or is it just spent?

Perhaps the most important thing to him is seeing more Michigan residents get a college degree. Detroit, he said, was a quintessential 20th-century success story, with great wages and secure retirements easily within reach of folks without a college degree. That’s no longer the case.

A report earlier this year from the Lumina Foundation ranked the Twin Cities as the fourth-highest metro area by percentage of people with an associate’s or bachelor’s degree. Detroit’s was 20th out of 25 on its list.

In 2012, 51.9 percent of young adults under 35 in Minnesota had a degree, well above the national rate of 40.9 percent. It was only 38.5 percent for the same age group in Michigan.

Glazer said it would be hard to overstate the economic impact of that big disparity in the educational attainment of the two states’ respective workforces, summing up his group’s thinking this way:

A healthy economy exists in states where government has spent money to make it easier to get a college degree and more money to help make the state an attractive place where highly educated people will choose to live.

“You have done it,” Glazer said. “We haven’t.”

lee.schafer@startribune.com 612-673-4302

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