The 2013 tax increase that raised marginal tax rates on the wealthy is driving some residents out of Minnesota while acting as a barrier to attracting new affluent residents, according to a new report from the Center of the American Experiment, a conservative think tank.
Minnesota's economy lost $944 million after the 2013 tax increase because of a net out-migration of high income earners, the report says.
"This unprecedented loss in income demonstrates Minnesota is becoming less attractive place to live and work," said Peter Nelson, the report's author and a senior policy fellow at the think tank.
The report will provide rhetorical fuel to Republicans who say Minnesota's status as a high tax state inhibits economic growth.
The report says Minnesota lost a net 4,775 high income families in 2013-14 after the fourth tier tax bracket on the wealthy passed the Legislature at the behest of DFL Gov. Mark Dayton. Minnesota needs these rich residents for a prosperous economy, Nelson said.
Contrary to widely held beliefs, many of the people leaving are still working age and not retirees, Nelson said. Nearly 40 percent are between 35 and 54. They are usually going to lower tax states, the report shows.
Nan Madden, a policy analyst for the liberal-leaning Minnesota Budget Project, said the report misuses the IRS data. She said it overstates the net loss of income because it fails to account for people who have left a job that is being replaced by someone else and thereby leading to no net loss of income.
She also said studies show that taxes are a limited factor in people's decisions about where to live, noting that Minnesotans are moving to California despite its high tax environment. People move for weather, family reasons or economic opportunities like clustered industries of Silicon Valley, for instance.
"It's not something that should drive tax policy," Madden said.
