Dayton’s Policies Hurting Minnesota Businesses

Alpha News recently reported that a wealth exodus from Minnesota is taking place at an alarming rate, and it is costing the state massive sums of tax revenue.  Minnesota is continuing to see a growing list of businesses closing and/or leaving the state, including the recent departure of Oakdale-based technology company, Imation.  A recent Twin Cities Business article depicts that this wealth migration is harming the business climate in Minnesota as well. The article penned by Twin Cities Business Editor-in-Chief, Dale Kurschner, asserts: “Billions of dollars are fleeing the state because of higher taxes and a growing perception that its government is “anti-success.”

Utilizing the phrase “anti-success,” Kurschner is pointing out that the current Minnesota tax system penalizes people for being high earners. In other words, it does not encourage financial success. This sentiment that the state is “anti-success” is supported by a study written by Peter Nelson for the Center of the American Experiment (CAE). The study conveys that Minnesotans are migrating to lower tax states, and the state lost out on nearly $1 billion in household income in 2013-2014 alone. The loss of $1 billion is the highest recorded loss of adjusted gross income in Minnesota’s history.

In an interview with Alpha News (which will be featured in a video later this week), Nelson explained that the people leaving Minnesota are not retirees seeking warmer states, but rather the people leaving are still major income-earners.  Nelson explained that those migrating are, “middle-aged people who are moving in their prime earning years.”  In another interview that will be featured later this week, Kurschner explained to Alpha News that he found many of those who are leaving Minnesota are also CEO’s of major Minnesota businesses.

One CEO told Twin Cities Business that he chose to move to Florida after Governor Dayton made him feel like he did not want him to stay in a private meeting they had.  The CEO found Dayton’s words and policies to be in stark contradiction to Republican Florida Governor Rick Scott, who the CEO happened to see at a restaurant, at which point Scott told him “If there’s anything I can ever do for you, please let me know.”

Penalizing successful entrepreneurs and business owners for being financially successful is harming the state’s business climate. Currently, Minnesota has the third highest state income tax rate in the country, at 9.85% for its wealthiest citizens.  In addition, roughly 22,000 Sub-chapter “S corporations” are affected by this high tax rate, as their profits are taxed through the owner’s personal income tax return, providing additional incentive for business owners to leave. S corporations avoid double taxation (personal and corporate tax), but high income tax rates disproportionately affect S corporations and their owners.

In addition to increasing taxes on wealthy earners, the state also redefined the highest tax bracket, making it lower to ensure more people get taxed at a higher rate.  Since this change, the amount of money paid by those in the state’s highest earning tax bracket has increased by 25%.  Several of these high-earners are business owners.

The Minnesota Jobs Coalition, a social welfare nonprofit that focuses on advocating policies that lead to job creation argues that, “Minnesota is heading in the wrong direction” under Dayton, citing four main reasons: high taxes, crippling regulations, stalled projects that create jobs (such as Polymet), and “irresponsible spending.” When Dayton took office the state was home to 20 Fortune 500 companies, but today there are only 17. This means under Governor Dayton the number of Fortune 500 companies headquartered in Minnesota has fallen by 15%.

Subscribe to Alpha News as we continue our series on Minnesota’s wealth exodus.