News & Updates

Minnesota has a reputation among conservatives as a high tax, big government state. However, based on some of the better metrics, total state and local government expenditures in Minnesota are about equal to the national average, with Minnesota ensconced in the middle of the fifty states in terms of expenditure rankings.

Minnesota generally ranks fairly high among states in terms of taxes per capita, but this is not a reliable measure of the size of government. High per capita income states such as Minnesota typically receive fewer federal dollars than do low per capita income states. As a result, high per capita income states have to rely more on taxes and other own-source revenues, even though they are not necessarily spending more per capita. In addition, high per capita income states typically have higher labor costs and thus must pay more per worker. A Minnesota Department of Revenue analysis found that variations in per capita income explain over half of the variation in per capita taxes among states.

Taxes provide only 54 percent of total state and local government general revenue nationwide (and 58 percent in Minnesota); thus, taxes are at best only a partial barometer of the overall size of government. A better way to gauge the relative size of government in the fifty states would be to examine total government revenue or spending rather than just taxes. Furthermore, in order to control for the higher labor costs in high per capita income states, it makes more sense to examine revenues or expenditures relative to statewide personal income rather than on a per capita basis. In addition, an examination of spending in comparison to personal income provides a better gauge of the size of government in each state relative to the size of that state’s economy.

The chart below shows state and local government spending per $1,000 of personal income in each of the fifty states and the District of Columbia using fiscal year (FY) 2013 expenditure data from the U.S. Census Bureau and personal income amounts from the U.S. Bureau of Economic Analysis.* FY 2013 is the most recent year for which Census Bureau expenditure data for all fifty states are available.

S&L spending

State and local government spending per $1,000 of personal income in Minnesota is $222. (In other words, total state and local expenditures in Minnesota equals 22.2 percent of statewide personal income.) This is 2.7 percent below the U.S. average of $228. Minnesota ranks 31st among states in terms of state and local spending per $1,000 of personal income. In other words, 29 states and the District of Columbia have higher spending per $1,000 of personal income, while 20 states have lower spending. Relative to its four neighboring states, Minnesota has lower spending than Iowa and Wisconsin and higher spending than North and South Dakota.

Even if we remove the outlier states of Alaska (atypical in terms of geography, population density, and heavy dependence on energy-related tax revenues) and the District of Columbia (not a state), Minnesota’s state and local government spending per $1,000 of personal income remains modestly (2.3 percent) below national average. (Total state and local expenditures in Alaska and the District of Columbia are not large enough to cause meaningful change in the national average.)

In conclusion, total Minnesota state and local government expenditures relative to the state’s personal income—and relative to the size of the state’s economy—is below the national average and below that of most other states. The second part of this series will examine total state and local government revenues relative to personal income.



*The fiscal year of most states, including Minnesota, begins on July 1 of the preceding calendar year. (For example, FY 2013 began on July 1, 2012 and concluded on June 30, 2013). In order to more closely coincide with the FY 2013 expenditure data, the personal income data used in this analysis is from the last two quarters of calendar year 2012 and the first two quarters of calendar year 2013.

Big Debt, Big Deal

Minnesota is living under a $27 billion mountain of student loan debt.1 A student graduating in Minnesota today has an average of $31,000 in debt.2 Whether we realize it or not, it is affecting both individuals and the broader community. The challenge of student loan...

Minnesota Business Tax Rate Equals U.S. Average

Business groups—including the Minnesota Business Partnership and Minnesota Chamber of Commerce—actively cultivate the notion that business taxes in the Gopher State are high relative to the rest of the nation. However, total state and local business taxes as a share...

Ensure Respect for Minimum Wage Laws

(Note: This article is co-authored with Laura Huizar, a staff attorney at the National Employment Law Project in Washington, D.C.) A few weeks ago, the St. Paul City Council introduced a draft ordinance that would raise the city’s minimum wage to $15 an hour. That’s a...

Caring in Central Minnesota

Minnesota is getting older every day.1 The aging of our population is increasing demand for home health and personal care workers. We also continue to have population growth through both immigration and natural growth. To fill the needs of our changing population we...

Gas Tax Buys One-Third Less Today Than in 2000

The single largest source of funding for Minnesota’s transportation system comes from the state gas tax. However, the purchasing power of that tax has dropped by over one-third over the course of the century, leaving funding for state roads and bridges in a precarious...

State Aids: The Shrinking Slice of the City Revenue Pie

City property taxes have increased significantly in recent decades. Even after adjusting for inflation and population growth, the property taxes collected by Minnesota cities have increased by 48% from 1990 to 2018. However, real (i.e., inflation-adjusted) per capita...

Government Growth in Context

Shocking claims of growth in government abound. However, viewed in context of the economic, demographic, and societal changes that have occurred over the last fifty years, the growth in government is far less astounding than the sound-bite statistics indicate. For...

Impact of Legislative Decisions on School Funding

State aid to Minnesota school districts—properly adjusted for inflation—has fluctuated significantly over the last fifteen years, but the overall trend has been downward, as documented in a recent North Star report. Of course, long-term trends are not exclusively the...

Minnesota’s Shared Health

Minnesotans value a high quality of life. It is part of the Minnesota story and one of our competitive advantages. This includes having healthy people in healthy communities. Historically, policy makers have recognized the importance of health care access by investing...

Contact Us

Use this form to get in touch with North Star staff, or send your questions, suggestions, and ideas to