State economic policies have consequences

In recent years, BizTimes has published news stories about dozens of Illinois businesses that have moved across the border into Wisconsin.

Most of those companies have moved into Kenosha County. By any measure, the Badger State appears to be taking Illinois’ lunch money.

However, the relationship between Wisconsin and its western neighbor, Minnesota, appears to be a vastly different story. By virtually every measure, Minnesota is taking Wisconsin’s lunch money, according to a recent study by the LaCrosse Tribune, which lies right at the border.

First, a review. Wisconsin Gov. Scott Walker (a Republican) and Minnesota Gov. Mark Dayton (a Democrat) were both elected to office in 2010. They both inherited large state budget deficits.

Walker, who was facing a 9.2 percent unemployment rate and a $3.6 billion deficit, and the Republican Legislature passed massive spending cuts to public education and enacted the controversial Act 10 to require most public employees to pay more for their health care and pensions. Some tax credits for lower income residents were reduced. Business tax incentives were added, and taxes were cut nearly $2 billion through a combination of income and property tax reductions.

Dayton tackled a $5 billion deficit. Minnesota balanced its budget in part by borrowing against its commitment to education aid. After the 2012 elections, when Democrats took control of the Minnesota Legislature, taxes were raised on the wealthiest Minnesotans and tobacco taxes were increased.

Walker’s tax plan reduced the highest tax rate for the wealthiest Wisconsinites from 7.75 to 7.65 percent and brought slight relief to all income levels. Dayton’s plan created a higher rate of 9.85 percent for the top 2 percent of Minnesota’s wealthiest. Dayton’s plan increased tax credits for renters — the opposite of Wisconsin, where those tax credits were cut. Dayton also signed a $508 million tax cut in 2014, of which $232 million was aimed at the middle class and $232 million was earmarked for the elimination of some business taxes.

Minnesota increased its minimum wage to $9.50 per hour and has it indexed to increase with inflation. Walker opposes raising Wisconsin’s minimum wage.

Minnesota accepted federal Medicaid money and created its own health care marketplace, reducing its number of uninsured residents. Wisconsin rejected federal money, instead tweaking coverage to put some 80,000 people into a federal exchange. That cost the state an estimated $206 million over the past two years and an estimated $460 million through 2020.

The results? Wisconsin ranks 32nd in the nation in job growth. Minnesota ranks 26th. Minnesota’s seasonally adjusted unemployment rate dipped to 3.7 percent. Wisconsin’s unemployment rate stands at 5.0 percent. The median household income in Minnesota is about $60,000. Wisconsin’s is just below $52,000.

While Wisconsin faces an estimated $2 billion state deficit and plans to slash the University of Wisconsin System’s annual budget by more than $300 million, Minnesota has a $1.2 billion state surplus.

The stark differences between the states continue. The Wisconsin Legislature recently sailed through a right-to-work law that will ban labor unions from compelling members to pay union dues. Members of the Wisconsin Contractors Coalition, a group of more than 350 companies, testified against the law.

Minnesota’s Job Growth and Energy Affordability Committee chairman, Rep. Pat Garofalo (R-Farmington) wasted little time and extended invitations to Wisconsin businesses offering assistance to relocate their headquarters to Minnesota.

Rep. Dean Knudson (R-Hudson) responded, “My colleagues and I will continue to do what is best for Wisconsin. We have full confidence that our record of lower taxes, less regulation, and an attractive business climate stands strong against Minnesota’s choice to tax and spend.”

Stay tuned.