(Daily Caller News Foundation) — If you want to know what the Left would do to America, pay attention to what it is doing to Minnesota.
The Gopher State went into the 2023 legislative session with a forecast budget surplus of $18 billion for the 2024-2025 biennium. Given November’s election results, most observers expected some mix of spending increases and tax cuts. Instead, not only did the DFL “trifecta” spend almost all of that surplus, it also raised taxes and fees by $10 billion over the next four years.
Minnesota’s state government spending will be 33 percent higher in 2027 than it was in 2022. This includes, among other things, new spending on welfare via refundable tax credits — rebranded “tax cuts” by the state’s biased media — free college tuition for children of families making less than $80,000 annually, and free healthcare, the latter two available to illegal immigrants. State employment will swell by thousands just as a new, higher pay deal has been agreed with state employees, and a brand new payroll tax will fund a generous paid family and medical leave scheme, although nobody actually knows how much this will cost.
To pay for all this the DFL raised a range of taxes, including sales and gas tax, imposed new ones, such as on home deliveries and newly legalized marijuana, and hiked a range of fees on things like cars and boats. Primarily, they relied on hikes in pro-cyclical taxes such as “global intangible low-taxed income taxation” and a new net investment income tax. As Mark Haveman of the Minnesota Center for Fiscal Excellence notes, “Minnesota is replacing the least volatile sources of state income tax revenue — salaries, wages, and Social Security income — with the most volatile sources.” If the economy hits trouble, so will the state’s budget.
All of this will exacerbate one of Minnesota’s persistent problems: the flight of residents to other parts of the United States, with Ron DeSantis’ Florida being the top destination. Indeed, the last two years have seen record numbers of Minnesotans fleeing the state. We are hemorrhaging residents, on net, in five of the six categories the IRS reports — including those under 26 — and in every income category above $25,000 annually.
Gov. Tim Walz admits that this is a problem but, while research has clearly found that taxes play a role in where people choose to live and work, his administration has hiked them. The DFL is gambling that it can offset the “push” factor of higher taxes with the “pull” factor of left-wing social policies — culture over economics.
NBC hailed “protecting abortion rights, legalizing recreational marijuana and restricting gun access” as the trifecta’s key achievements, noting that “they have signaled their plans to take on issues like … providing legal refuge to trans youths whose access to gender-affirming and other medical care has been restricted elsewhere.” The Daily Beast celebrated “a wide range of progressive reforms” including “a bill making 55,000 felons eligible to vote” and “a measure allowing undocumented immigrants to obtain a driver’s license.” Will this attract enough people to reverse Minnesota’s historic outflows? The research here is somewhat thin.
Fifty years ago, Time magazine famously branded Minnesota “The State That Works.” That claim rested on a thriving urban center, strong economy, low crime, clean politics, and exceptional education. In 2023, Minnesota can offer none of that. Minneapolis is now a ghost town, the state’s serious crime rate is higher than the national average, the largest fraud in the United States stemming from payments made during the COVID-19 pandemic occurred here, and our preK-12 ranks 22nd, down from 8th as recently as 2017. The legislative “triumphs” heralded by the national media will do nothing to improve any of those.
This matters beyond Minnesota. As Democrats search for an alternative to the ailing President Biden for 2024, some have offered Gov. Walz. The Daily Beast has branded him “the anti-DeSantis,” a comparison Walz has invited but which DeSantis would surely relish. The New Republic argues that Minnesota shows “What Democrats Can Accomplish When They Control a Whole State.” Sadly, we would not disagree. Pay attention.
John Phelan is an economist at the nonprofit Center for the American Experiment. He previously worked as an economist for Capital Economics in London, where he wrote reports ranging from the impact of Brexit on the British economy to the effect of regulation on cell phone coverage. He holds an MSc from the London School of Economics.
John Phelan
John Phelan is an economist at Center of the American Experiment.
