Study ranks Minnesota 49th out of 50 states for entrepreneurs

Rankings schmankings

Back in September, Governor Walz announced a new effort to attract business to Minnesota; “we’re focused on maintaining our record as a top state for business,” he said. This record is largely myth, based on rankings of business friendliness which do not actually measure which states are most business friendly, an important flaw, one would have thought.

Other rankings tell you a different story. The Minneapolis/St. Paul Business Journal reports:

A new study puts Minnesota among the worst U.S. states for entrepreneurs, tracking some significant drops in the state’s performance in the past year.

The study, conducted by SimplifyLLC, a small business publication run by a team of accountants and attorneys, analyzed federal data according to six factors: job creation, consumer spending, inflation, business growth, corporate taxes and educated worker migration.

Out of 51 markets (including Washington, D.C.), Minnesota was ranked No. 49 this year, falling 20 points in Simplify’s 2024 study.

As noted by Simplify, Minnesota experienced 11.2% fewer new business applications year-over-year ending in November 2024, according to the U.S. Census Bureau. It was also on the higher end of inflation, with a 20.5% increase in average household costs from 2021.

Out of the six metrics, Minnesota only scored among the worst five states in one category: corporate income taxes. Minnesota for years has had the highest corporate income tax rate at 9.8%.

Of course, the questions asked of one “study” should be asked of another. We must avoid confirmation bias. The proof of the pudding is in the eating, as they say, and the measure of the worth of a “study” of business friendliness is how well it aligns with what businesses actually do. The Simplify analysis – which includes measures of actual outcomes, like business formation – seems to do that rather better than C.N.B.C.’s much touted rankings, which measure all manner of irrelevancies. Maybe Gov. Walz, back from his failed run for the Vice Presidency, could launch another initiative?