Minnesota Governor: State Needs to Do More for Economic Development

Many states are debating tax increases to balance their ailing budgets. Tax increases are unpopular with citizens and businesses. In selling his no-tax-increase budget plan, Minnesota Gov. Tim Pawlenty often points out that Minnesota's tax burden is higher than other states in the region. But despite the higher taxes, Minnesota also has been more prosperous than those states. Some experts say Minnesota's use of tax dollars has strengthened the state's economy. Others question whether that's still the case.

Pawlenty says "We’ve got to get serious about having an environment here that says to job growers and job providers, this is a place where it's a reasonable business decision to expand and grow your business here. And setting aside China and Mexico and Indonesia and the other places, I don't want to lose any more jobs to Wisconsin, and northern Iowa, and South Dakota, and North Dakota." In the last year, Ford Motor Co., picked Wisconsin over Minnesota for a new parts distribution center. Smaller firms have moved there as well, in some cases attracted by lower property taxes. The head of one small firm says the move saved his company nearly $80,000 in taxes. Others say it's a wash.

Economist Art Rolnick, director of research at the Federal Reserve Bank of Minneapolis, says personal income is a key measure of a state's economic success. "We look at per capita income as probably the measure of how successful our economy is," says Rolnick. Minnesota's personal income has been higher than the border states and the national average since 1981, and in the top ten since 1996. Wisconsin has lagged the national average for more than two decades. Rolnick says that Minnesotans receive considerable payback for their tax dollars in terms of education, quality of life and other public services.

Meanwhile, the Bush Administration is still looking for a way to slash Federal taxes. Many question whether this proposal will be possible due to the rising costs of the Iraqi War effort.

Go here to read more about the Minnesota debate.