Everyone agrees Minnesota needs jobs and economic growth, but the right policies to achieve this goal are a topic of frequent disagreement. Many argue taxes and business costs must be the focus of Minnesota policy efforts. Others argue instead for a focus on human capital, physical infrastructure, workforce development, and related issues connected to long-term state productivity.
Both issues clearly matter to job creation and economic growth; the challenge is figuring out the right balance. Our state economist has described this balancing act as Minnesota’s “Fiscal Catch-22.” Spend too little on essential physical infrastructure and human capital, productivity declines and economic growth suffers. Tax too aggressively, businesses will choose to invest elsewhere (or disinvest here) causing job creation and economic development to stagnate or decline.
In Finding our Balance: Taxes, Spending and Minnesota Competitiveness we examine Minnesota’s performance in this balancing act. We review and summarize the results from a number of national ranking studies on state competitiveness and state business climate using the analytical framework of one of the nation’s most authoritative voices on national and state competitiveness. We highlight key findings and conclusions and discuss several policy-related questions arising from this review. We conclude by offering our recommendations on addressing Minnesota’s “Fiscal Catch-22” in the future and on issues relevant to the current budget debates.