(L-R) Minnesota Governor Tim Walz greets US Vice President Kamala Harris as she arrives at the … [+] Minneapolis-St. Paul International Airport in Saint Paul, Minnesota, on March 14, 2024. Harris toured an abortion clinic, highlighting a key election issue in what US media reported was the first such visit by a president or vice president. (Photo by STEPHEN MATUREN / AFP) (Photo by STEPHEN MATUREN/AFP via Getty Images)
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Minnesota Governor Tim Walz is Democratic nominee Kamala Harris’s pick for Vice President. First elected in 2018, he is in his second term as governor of the Gopher State. The duo’s economic platform has yet to be fully revealed, but Governor Walz has shown himself to be a big-spending, high-tax governor who has recently overseen a relatively weak economy.
According to data released in May by the Bureau of Labor Statistics, average weekly wages in Minnesota grew by 3.1% in 2023, which ranked 36th among the 50 states. In addition to its relatively slow wage growth, Minnesota’s GDP shrank by 0.8% on an annualized basis from the last quarter of 2023 to the first quarter of 2024. Meanwhile, national GDP grew at an annual rate of 1.4% over this period. Minnesota’s employment growth has also been slow: From June 2023 to June 2024 total nonfarm employment only grew by 0.7%, which ranked 42nd among the states.
People have also been leaving Minnesota. Recently released IRS data analyzed by Chris Edwards of the Cato Institute show that in 2022 only 0.86 households moved to Minnesota for each one that left. As a result, Minnesota lost 8,221 households. Among high-income households earning more than $200,000 per year Minnesota fared even worse: Only 0.64 households moved in for every one that left, which ranked 46th out of 50 states. Only Massachusetts, New York, California, and Illinois had lower migration ratios (see figure below).
State migration ratios for 2022
Cato Institute
In recent years, Minnesota’s population growth has stalled, and its economy has grown slower than most other states. While these poor outcomes cannot be completely attributed to Governor Walz, his support for higher taxes and more government spending has not helped. Research shows that high tax rates reduce economic growth and encourage workers and businesses to relocate to lower-tax states.
In 2020, Governor Walz supported $330 million in higher taxes annually and pushed for more tax hikes in subsequent years, including higher marginal tax rates, higher gas taxes, and an increase in the state’s capital gains tax.
He is also a big spender. According to data from the Urban Institute, total state spending in Minnesota increased from $41 billion in fiscal year 2019 to $58 billion in fiscal year 2023, a 40% increase. The state’s most recent $72 billion budget includes a higher sales tax in the Twin Cities metro area, a new $0.50 fee on non-food deliveries over $100, and higher driver’s license and vehicle registration fees to pay for more government spending on everything from tuition at public colleges to subsidized paid family leave.
Walz’s budget also included one time tax rebates and an expanded child tax credit. Though billed as a tax cut, these are not the type of tax reforms that incentivize work and investment and thus strengthen the economy.
It is a shame that Governor Walz has not pursued real tax reform because Minnesota could certainly use it. It has one of the worst business tax climates in the country, ranking 44th on the Tax Foundation’s State Business Tax Climate Index. Minnesota also ranks poorly on the tax component of the Economic Freedom of North America index, coming in at 43rd (it also ranks 43rd on the index overall). Clearly, Minnesota’s tax policy is not designed to encourage work, innovation, or entrepreneurship.
If his actions as governor are a guide, we can expect Tim Walz to advocate for more taxes and more government spending as vice president. This would be unfortunate, since higher taxes on investment and work will slow economic growth and federal spending is already on an unsustainable path. The Congressional Budget Office projects federal debt to reach 122% of GDP by 2034 and 166% of GDP by 2054.
Of course, there is a chance Governor Walz could surprise us over the next few months by supporting pro-growth tax policy and prudent government spending. But this seems like a risky bet for those who want a strong economy.
Source link : https://www.forbes.com/sites/adammillsap/2024/08/06/governor-walz-has-overseen-a-weak-economy-in-minnesota/
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Publish date : 2024-08-06 07:52:00
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