South Dakota Attracting Minnesota Jobs? If Only!

Minnesota gubernatorial candidate Tom Emmer is fanning those good old Perpich-Janklow flames with billboards warning Ole and Lena about the great economic menace to the west, South Dakota. His billboards say, "Don't Lose Another Job to South Dakota." Emmer's ag issues webpage says "Minnesota’s increased regulations and taxes have pushed many producers to relocate in South Dakota." (I sure hope they bring their nice topsoil and not just Rick Millner's ill-managed cows.)

South Dakota could certainly use an infusion of good Minnesota jobs. Alas, there is no hard evidence to support Emmer's claim that Minnesota is losing jobs to South Dakota. For some economic straight talk, we turn to Art Rolnick, currently at U. of M., formerly head of research at the Minneapolis Fed:

"If you just look at taxes, business taxes, South Dakota has a much different structure, a much friendlier business structure," Rolnick said.

But Rolnick said Minnesota has a bigger, stronger economy than South Dakota -- the per capita income is 10 percent higher than in South Dakota and Minnesota is one of the top states for the number of Fortune 500 companies. It also has a highly educated work force and can attract businesses looking for a place that will attract good workers.

"I'm not saying taxes don't matter, but you have to look at the full picture," Rolnick said. "Over all these years when this debate has gone on, Minnesota's economy has done quite well" [Elizabeth Dunbar, "Rolnick: No numbers support claim of jobs leaving Minn. for South Dakota," Minnesota Public Radio, 2010.08.12].

Rolnick recognizes that Minnesota's higher taxes pay for public goods that improve the quality of life and add more value to the business climate than the taxes take away. That's why outside observers can rank five Minnesota cities in the top 20 best small cities while ranking Sioux Falls back at 77th. That's probably related to why Minnesota universities can provide a better return on your tuition investment than South Dakota universities.

Minnesotans in general aren't fooled by our "no taxes!" marketing ploys. Minnesota radio host Matthew McNeil recognizes that relocating a business purely for tax reasons is a "reckless business decision" that "could bankrupt a company" as it struggles to transfer machinery, recruit and train new employees, and deal with increased shipping costs.

A look at the South Dakota migration map also shows that attracting residents (you know, the folks who make business possible as workers and customers) is much more than our statewide tax policies. From 2000 to 2007, ten South Dakota counties saw net in-migration. The other 56 counties saw more folks move out than move in, despite having the same no-tax/low-tax business climate as the gainers. (See also my March article on Census data showing 90% of our population growth happening in just five counties.) Recruiting businesses and residents requires much, much more than letting corporate raiders off the tax hook.

Candidate Emmer's effort to bogeymanify South Dakota as the great Minnesota business sucker has no evidence to back it up. It's also not likely to play well with Minnesotans, who will find the suggestion that they should be afraid of South Dakota risible.