Counterpoint: There's more to Minnesota than taxes

We have a sound budget and a great place to live. In any case, it's an oversimplification to suggest that we're losing high-income earners.

By Cynthia Bauerly

March 21, 2016 at 11:09PM
Gov. Mark Dayton during the State of the State address at the University of Minnesota's McNamara Alumni Center on Wednesday, March 9, 2016, in Minneapolis, Minn. ] RENEE JONES SCHNEIDER • reneejones@startribune.com ORG XMIT: MIN1603092017364357
In 2013, Gov. Mark Dayton raised income tax rates on the wealthiest 2 percent of Minnesotans — but for the other 98 percent, tax rates have not increased in 15 years. (The Minnesota Star Tribune)

Gov. Mark Dayton has moved Minnesota forward by restoring long-term budget stability while making key investments to build an economy that works for all Minnesotans.

His 2013 tax reform bill put our state on the path to long-term growth and fiscal stability with a balanced mix of spending cuts and new revenue, mostly from higher income taxes on the wealthiest 2 percent of Minnesotans. The governor's plan is based on honest budgets — not one-time accounting shifts — so we can pay for our investments with responsible fiscal management.

In a recent Star Tribune commentary, Peter Nelson and the Center of the American Experiment (CAE) criticized the governor's tax policies and suggested that these policies are the reason that people move out of Minnesota ("New data show the problem with tax hikes," March 18).

Before addressing the CAE's conclusion, it is important to know two facts about the IRS data used to draw it. First, the data set the CAE used — measuring moving patterns from 2013-14 — is not final and was actually removed from the IRS website. Second, it does not provide any basis to conclude why people choose to move, because it does not contain data on people's motivation for moving. Drawing a causal relationship between tax rates and migration will not be supported by this data set even when it is reposted by the IRS.

An objective look at migration can help put this discussion in perspective. Minnesota has experienced decades of continuous net in-migration from international arrivals, the state demographer reported last year. Net losses from state-to-state migration have been observed in Minnesota since 2001.

As the Minnesota Budget Project has pointed out, the IRS data don't account for the fact that when someone with a high-paying job in Minnesota moves away, another person often replaces them in the same high-paying job. In that case, Minnesota doesn't lose that income.

Studies done after tax increases in other states have shown that the increase in the top tax rate did not affect how many high-income earners moved out of the state. Nonetheless, the CAE study suggests that cutting taxes would encourage more income to move to Minnesota. According to the same data, however, only two of nine states that recently enacted significant tax cuts had more income move into that state than leave it between 2013 and 2014.

Minnesota's history of migration is again important here. In 1999 and 2000, Minnesota cut taxes dramatically, but in 2001 we gained 27 percent fewer people than in the previous year.

In 2013 — when Dayton put Minnesota on a more sustainable fiscal path — the net number of people moving out of Minnesota actually decreased by 18 percent from 2012. It's important to remember that the wealthiest 2 percent of Minnesotans saw an increase in their tax rates in 2013. The individual income tax rates on 98 percent of Minnesotans have not been changed in 15 years.

Ultimately, the research on why people move shows that they move between states for a variety of reasons. Jobs, education, housing, community and quality of life are often more important factors when deciding on where to live and work. For some, taxes may well be on that list. But few people make a decision as important as moving their family based on taxes alone. And, we know Minnesota is an attractive state to move to. Here are just a few reasons from national sources:

• Median income increased in Minnesota every year from 2011 to 2014, according to Census Bureau information. In fact, Minnesota led the nation in median income growth from 2010-14.

• Forbes ranked Minnesota first in quality of life in 2015.

• Minnesota was named CNBC's No. 1 state for business in 2015, when we were also named fastest-growing state for tech jobs.

• Our credit rating has gone up, with major ratings agencies citing our strong financial management, replenished reserves, strong revenues and a structurally balanced budget.

• AARP named Minnesota as the best state in long-term services and supports available for older adults, people with disabilities and family caregivers.

And the list goes on. Minnesota ranks highly on those national lists because we invest in our people and our infrastructure.

We are building an economy that works for all Minnesotans, not just the wealthy few. While taxes may be a factor for some, they are not the driving force behind migration into or out of Minnesota.

Cynthia Bauerly is commissioner of the Minnesota Department of Revenue.

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Cynthia Bauerly

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