Tim Walz’s Progressive Tax Experiment

The Minnesota economy is no success story on the Governor’s watch

WSJ editorial. 

"Our friends in the press don’t seem to care about Tim Walz’s economic record as Governor of Minnesota. But Americans might be interested since it foreshadows where a Kamala Harris-Walz Administration would take the country with their policies. 

Minnesota boasts a low unemployment rate (2.9%), but that’s less impressive than it seems. Nearly all of its job growth under Mr. Walz has been in industries that rely on government spending. Since he entered office in January 2019, Minnesota has added a net 41,500 jobs. This includes 43,900 in healthcare and social assistance and 12,600 in government.

Private industries have lost jobs, including finance, information, professional and business services, retail, manufacturing and leisure and hospitality. Such job losses started before the pandemic but accelerated during Mr. Walz's prolonged lockdowns and have increased during the last year.

Manufacturing employment has declined by 7,500 over the past 12 months, while professional and business services have shed 22,700 jobs. This is especially notable since Mr. Walz last spring signed a giant tax increase, including a 1% surcharge on investment income over $1 million. He also reduced standard deductions for businesses such as for net operating losses.

At the same time he expanded myriad tax credits such as for rent, film production, dependent care and families. Minnesotans can even get a $150 refund for contributing to state political parties and candidates. Such tax credits shrink the tax base so much that Democrats have to keep rates high. Minnesota’s top rate is 9.85% not counting his one-percentage point surcharge—which sends the rich or retired out of state.

Households with roughly $5 billion in adjusted gross income left Minnesota between 2019 and 2022, according to the most recent IRS data. Minnesota in 2022 ranked eighth in income loss among states as a share of overall AGI, after Illinois, New York, California, New Jersey, Alaska, Maryland and Massachusetts.

Top destinations for Minnesota refugees include zero-income tax Florida, Texas and South Dakota. South Dakota’s rate of job growth has been more than four times higher than Minnesota’s since Mr. Walz took the helm. At least overtaxed and jobless Minnesotans can vote with their feet. If Ms. Harris wins, all Americans might have to live by California and Minnesota rules."