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20 Years Ago, Michigan And Minnesota Were Comparable — How Has Minnesota Pulled Ahead?

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A new report finds the economic policies of lawmakers in Minnesota have led the state to overtake Michigan. (Photo courtesy of Thinkstock.)

A new report finds the economic policies of lawmakers in Minnesota have led the state to overtake Michigan. (Photo courtesy of Thinkstock.)

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A mix of higher taxes and targeted investment by leaders in Minnesota have helped the state be an economic leader among Great Lakes states, according to a new report titled “State Policies Matter: How Minnesota’s tax spending and social policies help it achieve the best economy among Great Lakes state.”

“Their priorities are in education, road funding, a strong safety net for workers and low-income families, and it seems to produce some good results in their economy,” said Rick Haglund, who was commissioned to write the report released Monday.

This hasn’t always been the case, the report stated. Nearly 20 years ago, the living standards of the two states were comparable. But since then, Minnesota has begun to pull away in a number of categories.

During that time, Minnesota’s spending priorities included “education from preschool through college, human services, transportation and local government,” the report added.

Minnesota’s success can be attributed to the state’s mix of knowledge-based industries that pay higher wages than Michigan, keeping and attracting college graduates, and “tax, spending and other public policies that promote economic growth as well as stability through the ups and downs of the business cycle,” the report stated.

Another difference between the two states is the regionalism in major metropolitan areas. The Metropolitan Council serves the seven-county Minneapolis-St. Paul area which is similar to the Southeast Michigan Council of Governments (SEMCOG) in Metro Detroit, but has broader powers and taxing powers. It also operates the area transit system and wastewater treatment system.

The report concluded that while Michigan has focused on cutting taxes and shrinking the size of their government, Minnesota has taken a different path and “has largely invested that additional revenue in services and investments that matter in a knowledge-based economy.”

Among comparisons between the states:

2012 Per Capita income

Minnesota: $46,227

Michigan: $37,497

2013 Unemployment Rates

Minnesota: 4.6 percent

Michigan: 8.4 percent

2012 Poverty Rates

Minnesota: 11.4 percent

Michigan: 17.4 percent

2011 Combined State and Local Taxes

Minnesota: $5,016

Michigan: $3,655

Sales Tax

Minnesota: 6.875 percent

Michigan: 6 percent

Gas Tax

Minnesota: 28.6 cents a gallon

Michigan: 19 cents a gallon

2013 Revenue Sharing

Minnesota: $2.4 billion

Michigan: $1.1 billion

2013 Higher Education Spending

Minnesota: $1.3 billion

Michigan: $1.7 billion

2013 K-12 Spending Per Capita

Minnesota: $2,067

Michigan: $1,447

To view the complete report, visit the Michigan Future website.

 

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