The Minnesota Business Partnership and Tax Foundation today released Minnesota Illustrated: A Visual Guide to Taxes & the Economy, a chart book aimed at informing policymakers and thought leaders about Minnesota’s tax system and overall economic performance. The chart book provides a visual guide of the state’s entire tax code and gives taxpayers, the media, and policymakers information that could help improve the state’s business tax climate.
The latest edition of the Tax Foundation’s State Business Tax Climate Index ranked Minnesota 46th. The state’s corporate income tax structure compares poorly to other states, ranking 43rd in the country. Minnesota’s economy has traditionally fared better than the U.S. average, with the state experiencing relatively strong income per capita and low unemployment, but that trend could be reversing. The state’s tax code is very complex and burdensome, and could be holding back the state from more robust economic growth. The book’s authors examined the state’s tax code in detail and spoke with Minnesota taxpayers and businesses to learn about perceptions of Minnesota’s tax system from its residents.
“Compared to most other states, Minnesota has a complex tax code with high individual and corporate rates,” said Tax Foundation policy analyst Morgan Scarboro, one of the book’s co-authors. “Its property tax system is far more complicated than anywhere else in the country. And unlike a large majority of states, Minnesota also continues to impose an estate tax. These issues could limit Minnesota’s economic growth in the future.”
Although Minnesota’s tax code is progressive, its reliance on income taxes from higher income earners could lead to revenue volatility that complicates budget planning. Another issue is the state’s property tax, which has 52 different classifications, far more than any other state (South Dakota is the next highest at 14). In addition, Minnesota’s sales tax does not apply to services, which are a rapidly growing portion of consumer spending. As this new book shows, there are a number of opportunities for Minnesota to collect revenue more efficiently and in a way that helps boost the economy.
“Minnesota is blessed with a remarkable quality of life – due in part to our diversified economy and high concentration of large homegrown businesses – but we shouldn’t take that for granted. This report highlights a number of areas where Minnesota compares favorably to other states and some areas where we do not,” said Charlie Weaver, Executive Director of the Minnesota Business Partnership, which represents more than 120 CEOs and senior executives from Minnesota’s largest employers. “While Minnesota’s overall economy performs well compared to other states, we lag in important areas like employment growth and migration.”
Weaver continued: “We hope this report helps policy leaders recognize our state’s economic strengths and challenges and identify opportunities for improvement.”