The Cato Institute recently released its 17th biennial Fiscal Policy Report Card on America’s Governors, assessing tax and spending policies from 2022 onward.
The report highlighted significant disparities in fiscal management across the country, with six governors receiving top marks for their efforts to control taxes and spending.
Unfortunately for Minnesota Governor Tim Walz, he found himself at the bottom of the list, receiving a failing grade for his approach to fiscal policy.
High Marks for Fiscal Responsibility
This Article Includes
Governors Kim Reynolds (Iowa), Jim Pillen (Nebraska), Jim Justice (West Virginia), Sarah Huckabee Sanders (Arkansas), Kristi Noem (South Dakota), and Greg Gianforte (Montana) all received A’s from the Cato Institute for their ability to control state spending and cut taxes.
These governors have implemented policies that reduce the tax burden on residents and businesses, earning them high praise for their fiscal responsibility.
Why Tim Walz Ranked Last
Minnesota’s Tim Walz received the lowest score on the report card, and his fiscal record is under scrutiny. According to Chris Edwards, author of the report, Walz’s approach to state finances has been anything but cautious.
“His biennial budget in 2023 increased spending by 36%, while simultaneously raising business taxes, payroll taxes, vehicle taxes, and individual income taxes,” Edwards explained. “His F grade is well-deserved.”
Walz’s fiscal mismanagement didn’t stop there. Economist John Phelan from the Center of the American Experiment noted that Minnesota had a $17.6 billion budget surplus in 2023, which Walz quickly spent on various new programs.
Despite having an unprecedented budget surplus, the state is now projected to face a deficit in the coming fiscal years.
In addition to blowing through the surplus, the governor and the legislature introduced $10 billion in new taxes and fees, affecting everything from gasoline and food deliveries to cannabis and boat sales.
Tax Hikes Amidst National Tax Cuts
While Minnesota residents saw their taxes rise, many other states moved in the opposite direction. According to the State Policy Network, 26 states reduced taxes between 2021 and 2023, easing the financial burden on citizens and businesses.
The contrast between Walz’s tax hikes and the broader national trend of tax reduction has contributed to an exodus of high-income earners from Minnesota.
The Exodus from Minnesota
As a result of Walz’s fiscal policies, Minnesota has seen an outflow of families and high-income earners. IRS data shows that for every 10 households with incomes above $200,000 that leave Minnesota, only six move in.
This departure of wealthier taxpayers and entrepreneurs is not just about lost tax revenue—it also represents a loss of human capital, innovation, and potential economic growth.
Under Walz’s leadership, Minnesota’s economy has taken a hit. For the first time in recent history, the state has fallen below the national average in GDP per capita.
These troubling trends have caused Minnesota to become part of a larger migration pattern, where workers and businesses are relocating from high-tax, high-regulation states to more business-friendly environments like Texas and Florida.
A Grim Outlook for Minnesota
Despite Walz touting Minnesota as a top-five state to live and work in, according to a CNBC study, other metrics paint a less rosy picture.
The nonpartisan Tax Foundation ranked Minnesota 44th out of 50 states in its 2024 State Business Tax Climate Index. This ranking continues a decade-long trend of Minnesota becoming less attractive for businesses.
The loss of high-income residents and the resulting decline in tax revenue, innovation, and job creation is a long-term concern. As the Cato report indicates, the state’s policies are driving away the very people who create wealth and contribute to the state’s prosperity.
The Need for Fiscal Reform
While partisan politics often muddy the waters, Walz’s fiscal record speaks for itself. His approach to governance has resulted in higher taxes, runaway spending, and a dwindling business climate.
For Minnesota to reverse its economic decline, lawmakers may need to adopt a more restrained approach to taxation and spending. Without reform, the state risks further economic stagnation and outmigration.
The lesson from the Cato Institute’s report is clear: effective fiscal policy requires both spending discipline and a focus on maintaining a competitive tax environment. Minnesota’s future prosperity may well depend on whether its leadership can embrace these principles moving forward.