Never before had such a plan—known as “fiscal equalization”—been tried at the metropolitan level. “In a typical U.S. metro, the disparities between the poor and rich areas are dramatic, because well-off suburbs don’t share the wealth they build,” says Bruce Katz, the director of the Metropolitan Policy Program at the Brookings Institution. But for generations now, the Twin Cities’ downtown area, inner-ring neighborhoods, and tony suburbs have shared in the metro’s commercial success. By spreading the wealth to its poorest neighborhoods, the metro area provides more-equal services in low-income places, and keeps quality of life high just about everywhere.
For decades, Minneapolis was also unusually successful at preventing ghettos from congealing. While many large American cities concentrated their low-income housing in certain districts or neighborhoods during the 20th century, sometimes blocking poor residents from the best available jobs, Minnesota passed a law in 1976 requiring all local governments to plan for their fair share of affordable housing. The Twin Cities enforced this rule vigorously, compelling the construction of low-income housing throughout the fastest-growing suburbs. “In the 1970s and early ’80s, we built 70 percent of our subsidized units in the wealthiest white districts,” Myron Orfield said. “The metro’s affordable-housing plan was one of the best in the country.”
The region’s commitment to dispersing affordable housing throughout the metro area has since diminished. But the fiscal-equalization plan has proved durable.
The Twin Cities’ housing and tax-sharing policies have resulted in lots of good neighborhoods with good schools that are affordable for young graduates and remain nice to live in even as their paychecks rise. This, in turn, has nurtured a deep bench of 30- and 40-something managers, who support the growth of large companies, and whose taxes flow to poorer neighborhoods, where families have relatively good odds of moving into the middle class.
It’s an open question whether the ingredients of the Minneapolis miracle can be packed and shipped to other cities as neatly as its Pillsbury cookies. Minnesota and other states in the Midwest with cheap housing are blessed with land in all directions. Coastal cities are forever bounded by the world’s least developable real estate—the ocean. Yet cities such as San Francisco are also infamous for resisting the construction of new affordable housing.
No other large American city has adopted a plan like Minneapolis’s to sprinkle business taxes across a region in order to keep the poorest areas from falling too far behind. But in 2008, Seoul imported a version of Minneapolis’s tax-sharing scheme. Since then, the gap in funding for social services among the city’s districts has narrowed. According to a 2012 analysis by Sun Ki Kwon, then a graduate student at the University of Kentucky, this has helped Seoul’s poorest communities grow their tax bases while only minimally affecting the city’s richest districts.
One reason the American dream has come apart is that too few cities have shared their resources—and real estate—between the rich and the rest. This isn’t a fact of nature, like the mountains and oceans that restrain our coastal metros. It is a policy of our own choosing. The lesson of Minneapolis is that even our richest cities are free to make a different choice.