This meme originally came from American’s Against the Republican Party, but was recently shared by other large pages like Patriotic Millionaires and The Other 98%. It claims that Minnesota raised taxes on the rich, raised the minimum wage and signed an equal pay law, which resulted in positive economic effects. How accurate are these claims?

What Were the Changes?

This meme cites three changes by Minnesota. The first is a tax increase on the rich. This happened in 2013, and increased the top rate 2%, from 7.85% to 9.85%, for those earning more than $150,000 ($250,000 for married couples).

The second is a minimum wage increase. This took effect on August 2014. It was a fairly minor increase, phased in over several years. Before this bill, MN actually had a minimum wage below the federal level of $7.25, rendering it moot. The 2014 bill increased the minimum wage for large employers starting at $8.00/hr in 2014 to an eventual $9.50 by 2016. Small employers topped out at just $7.75/hr after the phase-in.

The third change is the “equal pay law” which was passed in 2014. This wasn’t substantially different from the 1963 federal law already in place, although it provides a few additional regulations like extending unpaid maternity leave to 12 weeks, requiring breastfeeding locations in the workplace and banning retaliation over discussing pay discrepancies.

Given these changes, let’s look at the economic environment in MN.

Unemployment Rate

The current unemployment rate for MN is indeed 3.2%, tying it for 12th in the US. However, every state surrounding MN also has similar or lower unemployment, and they have lower tax rates. As of February 2018 data, Wisconsin and Iowa had 2.9% unemployment and North Dakota had 2.6%. South Dakota, a state with no income tax at all, had a slightly higher rate, at 3.4%. It seems there is little reason to equate state tax rates with unemployment rates. There are states near the top without any income tax, like New Hampshire, and those at the bottom, like Alaska. Higher tax states are similarly found throughout the rankings, with Vermont near the top and New York, New Jersey and New Mexico near the bottom.

What about the effects after MN implemented these policies? If we look at the unemployment rate history for MN, it shows that unemployment peaked in 2009 at a high of 8%. It then began falling, and reached 5% before the tax rates were changed in 2013.

Looking at the graph, it’s clear that the trend was decreasing long before MN implemented these changes, so it’s likely that other larger forces in the economy contributed more to the improving unemployment rate. For example, the stock market boom, Federal Reserve interest rate policies or the improving global economy. Additionally, Minnesota ranked dead last in private sector job creation from March 2013-14, right when the hikes kicked in, so it could also be argued the effects were negative.

Fifth Fastest Growing Economy?

This is a difficult category to measure, as GDP tends to fluctuate dramatically each quarter in individual states. For example, in the 4th quarter of 2015, the MN economy grew by a rapid 6.3%, but the following quarter, it shrank by 4.1%. This means these statistics are ripe for abuse, and could be twisted to support different narratives.

To even out the fluctuations, we must look at an entire year, or several year average. The most recent state GDP data available is from Q3 of 2017. During the past year (Q4 2016- Q3 2017) MN averaged 2.1% growth. They’ve averaged 2.5% growth since the tax increases of 2013.

The overall US GDP growth was 2.2% for both of these periods, meaning MN slightly lagged behind the country during the past year, and was slightly ahead since 2013. The Meme Policeman compiled GDP data for all 50 states from the Bureau of Economic Analysis. In the past year, MN ranks 22nd in economic growth. Since their 2013 tax increases, they rank 12th. This puts them, as Garrison Keillor would say of Lake Wobegon kids, “above average”, but not among the fastest growing states in economic growth. The meme’s claim of 5th fastest-growing is wrong.

As with the unemployment rate, there are both lower tax and minimum wage “red” states (ID, TX, UT) that beat them out, as well as higher tax, high minimum wage “blue” states (CA, WA) that have higher growth.

Budget Deficit to Surplus?

The claim of a deficit turned into a surplus is a bit dubious. From 1995-2001 MN had a steady stream of budget surpluses, while legislators enacted some of the largest tax cuts in the nation. In 2011, just a couple years before these policy changes, MN ended up with a $876 million budget surplus, so they weren’t exactly unprecedented before 2013.

Still, there was a surplus after the tax increases, about $1 billion for FY 2014-15 primarily due to increased tax revenues and decreased spending on health and human services. This surplus subsequently grew to around $1.6 billion, but proved to be transitory, as there was recently a projected $188 deficit in December 2017. This deficit improved to a $329 million surplus after updated projections last month, although ironically state and federal tax cuts were credited with the improvement.

Claiming the initial budget surplus resulted from the tax increase has some validity, as revenue increased more than spending. However, seldom do tax increases yield continual surpluses, as governments begin to spend the additional revenue. Minnesota increased spending over 10% from 2014-15, going from $31.9 to $35.2 billion. Thus, the surplus in MN has virtually disappeared in just a few years.

Conclusion

This meme tries to credit liberal programs under Governor Dayton with economic prosperity. Some of its claims are outright wrong, while others are given without context and commit the correlation-causation fallacy. The reality is that the economic changes MN took weren’t that drastic. A 2% increase in tax rates among wealthier earners, a meager increase in minimum wage and an “equal pay” bill that didn’t make many changes. These changes happened during a period of overall national and global economic growth, and plenty of other economic factors that were likely far more influential.

The great economic results touted in this meme aren’t particularly impressive. Unemployment is low, but no lower than surrounding states. Economic growth is above average, but not exceptional. The budget surplus appears transitory and short-lived. One could just as easily cherry pick data and credit lower taxes and regulations in other states with their success.