A study on Minnesota's manufacturing climate gives the state high marks for innovation and productivity but low marks for its tax climate.
The analysis was conducted by Michael Hicks, an economics professor at Ball State University in Muncie, Ind. The 2013 Manufacturing and Logistics Report Card offers a state-by-state analysis of manufacturing climates, the Mesabi Daily News reported.
Minnesota ranked near the top in the nation in terms of manufacturing patents and spending on research and development per capita. The study also concluded that Minnesota's high-quality labor force is a competitive advantage that could encourage companies to relocate in the state.
"The presence of local talent ... through access to university laboratories and nonprofit research activities plays an important role in location decisions by manufacturers," the study said.
The manufacturing industry is 9.9 percent of Minnesota's economy. It accounted for earnings of $23.8 billion in 2011, the study said.
The analysis also pointed out that Minnesota was sixth-worst in the nation for corporate and individual taxes and 35th in the U.S. for sales taxes. It was near the middle, or 26th, in property taxes.
Hicks said high taxes can obviously make the state a less attractive destination for companies looking to relocate. But it's important to consider how the state spends its tax revenue, he added.
"Minnesota has done a fairly good job in investing those dollars in infrastructure and university research and development," he said.
Hicks said the bad tax climate is the only tangible restraint on the manufacturing economy of a state where manufacturing growth is likely.
The analysis also looked at liability gaps as a way to gauge states' future economic actions. A liability gap arises when a state fails to provide funding streams for responsibilities such as bond obligations and pension plans.
The study gave Minnesota a B grade in that category, which the study's authors called "a good indicator of the direction of future taxes and public services."