My streak of being right seems to be continuing. In 2013 I disputed Matt Yglesias’s argument that high local taxes are not an obstacle to economic growth, and that cutting taxes is not a good way to attract development to your jurisdiction. Among other things, I argued that a snapshot of laws and development at any given point don’t account for the destructive effects of bad policy over time – a rich jurisdiction will still look good for a while after adopting bad policy, even if the policy destroys opportunity in the long run. I argued that California and New York have bad policies that take advantage of their unique assets like Hollywood and New York City, and said
The counterpoint is Minnesota, a high-wage, high-tax jurisdiction without unique assets. Let’s see how they hold up in the long run.
It seems like the long run has been catching up with Minnesota:
The state has lost residents every year since 2002, with young adults most eager to leave. About 9,300 18- to 24-year-olds move out annually, according to the Minnesota State Demographic Center. …By 2020, the state is forecast to have a shortage of more than 100,000 workers.
It looks like Minnesota’s particular mix of policy is not that great at creating opportunities for its young people. This makes sense: raising taxes or other costs won’t drive all business away (as many have invested in their location and will profit more from staying than moving) but it is much more effective at preventing new business from being created. For example, raising the minimum wage won’t drive your fast food restaurants out of business, but it will give those who would open a restaurant an incentive to go to a lower cost jurisdiction. These opportunities are now being created outside of Minnesota, and the young people know it.