Tax and Spending Rankings: Who's Right?

Arguing over state rankings on taxes is a little like arguing over the order of professional draft picks — entertaining, but what really matters is results. Taxes, like college prospects, haven't accomplished anything until they are actually put in the game.

How much a state invests in itself and how that spending contributes to greater prosperity is the discussion we should be having, but instead, we're too often stuck on marginally meaningful distinctions about taxes.

Case in point from last week:

David Strom, President of the Minnesota Free Market Institute today lashed out at liberal think tank Minnesota 2020 and its President Matt Entenza for misleading Minnesotans on Minnesota taxes.

In Monday's (April 12) Star Tribune, Entenza claims that Minnesota's taxes are below the national average, placing Minnesotans' tax burden at the 32nd in the nation. That number is simply incorrect.

Well, if you ignore what Entenza actually said and trot out your own misleading number, it's simple to make it look incorrect.

Here's how Entenza's comment was reported in the Star Tribune story Strom cites:

But Matt Entenza, a former DFL legislator who now heads a think tank called Minnesota 2020, said the protesters had it wrong. For starters, he said, Minnesota is not one of the highest-taxed states in the nation if researchers consider all taxes, including fees, local property taxes and special assessments. Minnesota ranks number 32 in the nation when the broader taxes are included, he said.

Strom can't refute Minnesota's ranking on that basis, so he quotes a mixed bag of other numbers that support his claim that Minnesota's taxes are above average. But if you carefully read one of those reports, it actually supports Entenza's statement. It says:

For total state and local taxes, Minnesota ranked 20th for taxes as a percent of income. [One number Strom quotes to support his higher-than-average contention.] In comparison, Minnesota ranks 28th for state and local own-source revenue (taxes plus fees) and 33st [sic] for total general revenue (taxes, fees, intergovernmental revenue) as a percent of income.

Total general revenue reflects what Minnesota or other states actually have to spend on services. When you look at how Minnesota's state and local governments compare with other states on spending, we're above average only in public welfare and transportation. [See this report from the middle-of-the-road Minnesota Taxpayers Association Download pdf.]

Strom, the Minnesota Free Market Institute and the Taxpayers League of Minnesota may still insist on citing per-capita tax rates. MN2020, the Minnesota Budget Project and Growth & Justice will say percent of income is the best measure to use. Entenza's statement holds up, but there's no settling this argument.

But on the spending side, where it really matters, Minnesota is starting to look like a late-round pick.