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Tax Policy Ranking Doesn’t Correlate with More Jobs or Income

Last updated on 2014.04.14

Pierre has been too busy tooting its own horn about ad hoc funding for Mount Rushmore to shout much about the Tax Foundation's latest low-tax propaganda declaring South Dakota great for business and Minnesota awful due to state tax policy. When South Dakota Republicans do get around to it, be sure to remind them they are full of hooey.

Our Republican friends also like to talk about creating jobs and boosting income as signs of economic and political success. But Governing runs employment and income numbers against the Tax Foundation's rankings and finds conservative's touted pro-business tax policies don't translate into those real measures of economic gain. Here's a chart showing the non-correlation they find between the Business Tax Climate Score percentage of the population working:


Governing highlights Minnesota as an excellent example of this non-correlation:

A few of the Tax Foundation’s lowest ranked states are actually among the strongest performing in terms of current employment indicators.

The report singled out Minnesota, for example, because the state enacted policy changes said to have hurt competitiveness, particularly a retroactive individual income tax rate hike. Accordingly, the state fell three slots from last year’s report to the 47th worst in country.

To the contrary, Minnesota’s job market is quite strong. As of August, its unemployment rate stood at 5.1 percent – tenth lowest of any state. Elsewhere, it stacks up even better against other states. Its employment-to-population ratio is 66.7 percent, fourth best nationally [Mike Maciag, "Analysis: Do Business-Friendly Tax Climates Yield the Most Jobs?" Governing, 2013.10.10].

Business Tax Climate Score be darned, Minnesotans have lots of jobs to choose from. They also get better wages to keep them from falling for Governor Daugaard's mall pitch. Here's a chart showing the non-correlation between those tax scores and median annual wages:

wage-statechartI've noted before that the Tax Foundation's Business Tax Climate Score doesn't correlate with folks' sense of well-being. These economic dots scattered without relation to tax policy expose the Business Tax Climate Score as an exercise in ideology over empirical analysis, cheering for one's own beliefs instead of studying what really puts people to work and money in their pockets.


  1. Deb Geelsdottir 2013.10.14

    Oh Cory, you know this is right up my alley. (Big grin on my face.)

    The lesson is that regressive taxes and poor labor conditions are not enough to create a growing business environment. It's about economic and social policies, policies, policies.

    South Dakota does not require a MN-like population or current economy to begin easing into policies that will bring SD's economy to life.

    Education is #1. MN is strongly education-focused. It is part of what they do in MN. Education is a central part of the state's identity. There are problems here. The disparity between white children and those of color is much too high, so the state is putting a great deal of time, energy and money into bringing all students up to the same level. That's because the people of this state know we are only as strong as our weakest link. (Like a basketball team.)

    MN wantonly throws out a Welcome Mat to everyone. American Indians, gays, Africans, Latinas - they all have gifts to add to the state. People with mental health disorders can be awfully smart and make wonderful contributions. There is a strong social net so that someone with bipolar disorder, for example, can manage their daily life and play a positive economic role.

    MN doesn't welcome all these different people by putting up an "Open for Business" sign on the border. MN offers ESL classes, interpreters in dozens of languages, settlement assistance, cultural opportunities, honoring of non-Christian, non-European holidays, etc.

    This is a very brief clip of some things that make a strong business environment. Because SD has such a small population, getting started on a positive track could be relatively cheap. I would be so thrilled to see SD change direction and take off.

  2. caheidelberger Post author | 2013.10.14

    I do love teeing the ball up for Deb! :-)

  3. Stan Gibilisco 2013.10.14

    It is all meaningless, a chasing after the wind.

  4. John 2013.10.15

    South Dakota's low tax = better business climate makes perfect sense: when one, as have South Dakota's politicians, suspend belief in science. It appears that South Dakota's business schools may also lack a belief in science for they too often spout this ideological nonsense in suspension of science, or fail to publicly correct falsehoods or misleading statements to the contrary from the politicians. For if those tenured with academic freedom cannot or will not be on public watch for their profession in the public square, then what good is tenure and of what good are the tenured?

  5. Jenny 2013.10.15

    I agree with your statements on MN, Deb. I do want to point out that there is racism here, just like everywhere else. It's not openly blatant, but more behind your back comments I've heard such as, for example "the somalians come to MN because of generous handouts", etc. "Hispanics and somalians have way too many babies". Considering the vast changes I've seen in MN the last decade, the traditional Scandinavian/german cultures have gotten along more or less pretty smoothly with the newer cultures coming in. The churches in MN have played an important part in promoting peace and acceptance as have our politicians.

  6. Deb Geelsdottir 2013.10.17

    Cory, I found a ranking where SD is almost as good as MN!!!

    Its on

    It's hilarious! MN is #40, SD is #42.

  7. caheidelberger Post author | 2013.10.17

    (Deb! Resubmit; that link came up dry for me!)

  8. Deb Geelsdottir 2013.10.17

    Okay, just go to and look for the "Great American Menu." Right now it's first.

  9. Deb Geelsdottir 2013.10.17

    EVERYTHING ought to be dozens of spaces above lutefisk. That is the nastiest 'food' I've ever eaten and I've only done it once - under duress!

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