Since his nomination as the Democratic vice presidential candidate, Governor Tim Walz has frequently touted Minnesota as one of the best states for business in his media appearances and campaign speeches, while touting his pro-worker economic policies.

Whether Walz has had a positive impact on the economy will be scrutinized in the upcoming US elections, as Donald Trump and his vice presidential candidate JD Vance attack his record.

Since taking office in January 2019, Walz has placed a strong emphasis on economic growth and workforce development, coupled with progressive policies that promote equity and sustainability. During his tenure, the state has seen a surge in corporate expansion projects, but his tax and regulatory policies have drawn criticism from parts of the business community concerned about competitiveness and the overall investment climate.

Walz has emphasized workforce development through education and training programs, such as the One Minnesota Plan, which aims to prepare the workforce for high-skilled jobs in health care, technology and renewable energy. He has also pushed for significant investments in Minnesota’s infrastructure, particularly transportation, to improve the state’s attractiveness for investment.

Another focus of Walz’s administration is sustainability and Minnesota’s transition to a green economy. In 2023, he signed the Clean Energy First Act, which sets ambitious renewable energy goals and aims to make Minnesota’s power sector carbon-free by 2040. In June 2024, he signed legislation establishing an expedited review process for small wind and solar projects.

As a result, Minnesota has experienced growth in renewable energy under Walz’s leadership. The U.S. Department of Energy projects that an estimated $8.5 billion will be invested in large-scale clean energy generation and storage in Minnesota by 2030.

Minnesota’s importance as a business location

As Walz often points out, Minnesota ranked fifth in CNBC’s annual rankings of the top states for business in America for 2023, but fell to sixth in the 2024 rankings released in mid-July.

Despite its small population of less than 6 million people, Minnesota is a major business location. The state is home to the headquarters of 17 Fortune 500 companies, including Best Buy, 3M, General Mills, Target and United Health Group. The country’s largest private company, Cargill, is also based in Minnesota.

More than 900 foreign-owned companies from about 40 countries are now located in the state, employing more than 170,000 people, according to the Minnesota Department of Employment and Economic Development. Data from the International Trade Administration show that the share of employment in Minnesota by foreign-owned companies has increased from about 5.7% in 2018 (160,700) to about 6.4% in 2021 (169,300).

After a Covid-induced downturn in 2020, business investment and expansion projects in Minnesota soared over the next two years, according to figures from the Conway Projects Database analyzed in a report from the Minnesota Chamber of Commerce. The database tracks projects with a minimum investment of $1 million, the creation of 20 or more new jobs, or 20,000 square feet or more of new construction space. Minnesota recorded 184 such projects in 2022, marking an 11-year high.

“We have seen a dramatic expansion of several internationally based employers in Minnesota in recent years, including SICK, Cirrus, Yanmar, Daikin, Nidec, Polar Semiconductor, Bosch and Uponor,” says Laurence Reszetar, director of international business strategy at the Minnesota Trade Office, which is under the Department of Employment and Economic Development. “These companies represent a broad cross-section of industries, which also makes Minnesota attractive because we have an economy where our different industries interact and support each other.”

In 2022, however, the state lost three major expansions due to regulatory hurdles, totaling a loss of 350 potential new jobs and $1.2 billion in capital investment. In those cases, the companies involved — Huber Engineered Woods, Epitome Energy and Talon Metals — moved the projects to other states instead, heightening fears that Minnesota’s permitting and regulatory system was too burdensome.

Tax dispute between Walz and big industry

Taxes have been a central point of contention between Walz and many parts of the Minnesota business community. The state ranks 44th in the Tax Foundation’s 2024 State Business Tax Climate Index and has the highest corporate tax rate in the country at 9.8%. Walz proposed raising taxes on higher earners and corporations to fund social programs and education. This faced opposition from business groups but was eventually enacted. On the other end of the spectrum, he supported tax breaks for small businesses, especially during the pandemic.

Grow Minnesota! – a partnership between the Minnesota Chamber of Commerce and local chambers and economic development organizations – conducted a survey of more than 170 Minnesota businesses, economic developers and location selectors. Survey respondents cited Minnesota tax rates as the biggest obstacle for companies considering expanding in Minnesota.

“Governor Walz has long served the people of Minnesota in the National Guard, in Congress and as governor during difficult times, but during his tenure, opportunities were missed to make Minnesota’s economy more competitive,” said Doug Loon, President and CEO of the Minnesota Chamber of Commerce Forbes.

“Many progressive policies passed by the legislature and signed by the governor have prevented the private sector from reaching its economic potential. This puts Minnesota on the national stage, but there is still much work to be done to improve our business climate,” he adds.

On the positive side, companies and site selectors cited Minnesota’s strong workforce and well-developed industrial clusters in areas such as life sciences, skilled manufacturing and natural resource-based industries as competitive advantages for Minnesota. And 41% of companies surveyed said they have plans to expand in the state.