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Change Generation

Minnesota Taxes The Rich, Pays Workers More, And—Shocking—The Economy Improves

The state's economic success gives a simple and easy replicable model for how to grow an economy.

Minnesota Taxes The Rich, Pays Workers More, And--Shocking--The Economy Improves

[Photo: Hannah Foslien/Getty Images]

Change requires political will: Money, innovation, and public desire have little effect if policy isn't pushed, sometimes ruthlessly, to use them. It's a somewhat dull truth, but today we have a far-from-dull example of politics in full ass-kicking action.

Minnesota governor Mark Dayton has been in office for five years. When he took the job, the state had a $6.2 billion budget deficit and, says Huffington Post's C. Robert Gibson, a 7% unemployment rate.

Dayton didn't waste any time shaking things up. First, he taxed the rich. Anyone earning over $150,000 got their rate increased from 7.85% to 9.85% (couples hit the highest rate when they jointly earned over $250,000). That raised an extra $2.1 billion. Then he raised minimum wage to $9.50 (effective in 2018), and signed guaranteed equal pay for women into law.

[Photo: Office of the Governor Flickr]

The Republicans complained, of course, claiming that businesses leave the state (as if the cost and effort of moving were zero). The previous Minnesota governor, Republican Tim Pawlenty, the one who left the state with that $6.2 billion deficit, refused to raise taxes on anything but cigarettes, and added just 6,200 jobs. That's state-wide, and over two terms.

Dayton, with his modest but politically radical changes, added 172,000 new jobs, giving Minnesota the fifth-lowest unemployment rate in the U.S., as well as a median income that is $8,000 above the U.S. average. So much for the theory that taxing the rich and paying the poor properly will send businesses scurrying from the state.

"The reason Gov. Dayton was able to radically transform Minnesota’s economy into one of the best in the nation is simple arithmetic," writes Gibson. "Raising taxes on those who can afford to pay more will turn a deficit into a surplus. Raising the minimum wage will increase the median income. And in a state where education is a budget priority and economic growth is one of the highest in the nation, it only makes sense that more businesses would stay."

The right might call these policies crazy socialism, but it turns out that taxing the rich and raising the minimum wage, while investing in education, are all great for the bottom line.

But what kinds of politicians would enact such reforms? Surely the kind of governor who would fight against lobbyists, and fight to push his policies through a Republican-controlled legislature for two years, must be fueled by socialist idealism born from a life-long working-class struggle? Here's the kicker: Dayton is a billionaire, and not even a self-made one—he's the heir to the Target empire.

It's a great story, and shows that the protectionist right-wing creed of low taxes, and low pay for employees, along with minimal public investment, is bunk. Perhaps, if the right is serious about "making the country great," and about promoting business, instead of just adhering to anti-left dogma, then we'll see more states that follow governor Dayton's business-friendly lead.

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