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Editorial: Pay attention to biz-unfriendly reputation

States considered high-tax and thus not the friendliest for doing business “suffer from the same afflictions: complex, non-neutral taxes (and) comparatively high rates,” the Tax Foundation, a Washington, D.C.-based think tank, opined this week in releasing its 2014 State Business Tax Climate Index.

And apparently Minnesota is afflicted because the Gopher State ranked a dismal 47th, or fourth from the bottom, on the annual index.

“Minnesota … enacted a package of tax changes that reduce the state’s competitiveness, including a retroactive hike in the individual income tax rate,” Scott Drenkard and Joseph Henchman wrote for the Tax Foundation.

“While taxes are a fact of life, not all tax systems are created equal,” their report stated. “One measure, total taxes paid, is relevant but other elements of a state tax system can also enhance or harm the competitiveness of a state’s business environment. … It is important to remember that even in our global economy, states’ stiffest and most direct competition often comes from other states. The Department of Labor reports that most mass job relocations are from one U.S. state to another. … This means that state lawmakers must be aware of how their states’ business climates match up to their immediate neighbors and to other states within their regions.”

If that’s so, Minnesota has little to fear from its neighbors to the east and south: Wisconsin ranked 43rd in the index and Iowa 40th. But North Dakota was 28th and South Dakota was an impressive – and worthy of worry for Minnesota – second.

So what do high-ranking states have that Minnesota and others at the bottom lack? The absence of a major tax, Drenkard and Henchman answered.

“Property taxes and unemployment insurance taxes are levied in every state, but there are several states that do without one or more of the major taxes: the corporate tax, the individual income tax, or the sales tax,” they explained. “Wyoming, Nevada, and South Dakota have no corporate or individual income tax; Alaska has no individual income or state-level sales tax; Florida has no individual income tax; and New Hampshire and Montana have no sales tax.”

Liberal-minded Northlanders might be quick to disregard the Tax Foundation and its determinations and views. Despite its efforts to remain nonpartisan and its clean listing at, the Tax Foundation sometimes is labeled as right-wing extreme or libertarian, probably because of its advocacy for reducing the tax burden on all. The nonprofit has been around since 1937, however, suggesting its message, analysis and revelations about how much Americans are being taxed are more than heard; they’re respected.

Regardless of the source, warnings about Minnesota’s taxes and business climate demand serious consideration.

In May, billboards went up near Minnesota’s western border, touting North Dakota as “open for business.” The suggestion was that Minnesota wasn’t because of taxing and spending decisions made by the DFL-controlled 2013 Legislature.

The commercial real estate development association NAIOP has warned that a new warehousing tax enacted by the Legislature this year, along with other business-unfriendly business-to-business taxes, threatens to force Minnesota businesses “out of our state to (neighboring states) without such a tax.”

While it’s true Minnesota ranked eighth last month on Forbes 2013 List of the Best States for Business, the Minnesota Chamber and others were quick to point out that the ranking didn’t take into account the effects of DFLers’ decisions this past legislative session, as they’re not yet known.

No matter who’s spinning it or ranking it, Minnesota, like other states, has good reason to be concerned about its business climate. A strong, tax-friendly, business-friendly environment equals jobs, which equals prosperity and a healthy economy. State leaders have more than enough motivation to seriously consider every bit of criticism and praise and then to act accordingly. The index released this week by the Tax Foundation was only the latest bit of concern. How will lawmakers respond?


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