The Minneapolis Star Tribune reports that Minnesota now has a $1.9 billion state budget surplus. This comes after the state in 2013 raised its top income tax rate to 9.85 percent from 7.85 percent for families with incomes over $250,000. At the time of the tax increase the state had a budget deficit of $2.1 billion.
The tax increase generated lots of predictions of economic doom. Consistent with the prevailing conventional wisdom that low tax states––particularly those with low or no income tax––have the best economies. Think again!
As we detailed in our latest report, State Policies Matter: How Minnesota’s tax, spending and social policies help it achieve the best economy among the Great Lakes states, Minnesota is both the highest tax state in the Great Lakes and the state with the best economic outcomes, by far, in the Great Lakes region.
They have achieved the economic outcomes we all want––low unemployment, higher wages and high per capita income––in part through decades of public investments in the real drivers of economic growth: education, infrastructure and creating communities where people want to live and work.
Minnesota’s Governor Mark Dayton, the Star Tribune reports, wants to use the budget surplus to make even more investments in education and transportation. They write:
Gov. Mark Dayton told reporters that the surplus, which he credited to the state’s well-performing economy, should be used to invest in education and transportation, his two main priorities. Though he’s not opposed to offering tax cuts as Republicans are putting forth, he said spending on schools and the state’s infrastructure would be a way to spur future economic development.
“Inevitably, there will be another national economic slowdown or downturn, and Minnesota’s economy will be affected like everyone else’s,” he said. “Our budget surplus will disappear, so I propose that we invest our collective good fortune in our collective better future.”
If Michigan is serious about the more and better jobs goal Governor Snyder has set, Minnesota provides the playbook for achieving that goal.