Minnesota Taxes

Jeff Johnson, a 2018 candidate for Minnesota Governor, posted on Facebook:

With all the talk from the left about how federal tax reform will be costly to some taxpayers in very high tax states (like Minnesota), maybe it’s time we stopped complaining about the Feds and solve this problem for Minnesota taxpayers ourselves.

Minnesota is among the highest in the country in income tax, gas tax, beer tax, wine tax, sales tax, corporate tax, death tax, social security benefit tax, business property tax – and I could go on. We’ll never be South Dakota, but how about we remove ourselves from the list of most taxpayer-hostile states in the nation.

And don’t let anyone tell you that we only overtax the “rich” in Minnesota – it’s not just wealthy people who pay gas, sales, beer/wine and social security taxes. More importantly, our lowest income tax rate (applying to anyone making more than $10,350 per year) is higher than the highest rate in 22 other states. We’re not just taxing CEO’s to death in Minnesota, we’re taxing school teachers, mechanics, bartenders and child care providers to death.

It’s time we give Minnesota taxpayers a break!

Minnesota tax rates are unquestionably, by comparison, high. If we can reduce taxes without sacrificing critical services like roads, bridges, education, etc., I’m absolutely for it. But let’s be careful not to overstate the size of the problem / benefit of such a change: it’s only about half a percent of total taxpayer income.

I’ve looked at a few sources, and they show similar results. I’ll use the numbers from one source for consistency. We are 8th highest in the country. The range of overall state and local tax burden across all 50 states is from 7.1% to 12.7%, and Minnesota is 10.8%. We’re thus 2/3 of the way through that range. If the realistic goal is that we’ll never be South Dakota, but we should do better, let’s call that goal being 1/3 into that range instead of 2/3. That means dropping 1/3 * (12.7%-7.1%) = 0.5 percentage points (pp).

To be clear, this reduction would be in terms of overall tax burden, not in some particular tax rate. Larger reductions in, for example, income tax rates would be necessary to create that reduction in burden.

Source: https://taxfoundation.org/publications/state-local-tax-burden-rankings/

There is also room for improvement in the progressiveness of our tax system, but we’re doing better there already than in rates. In terms of progressiveness of our taxes, we are currently 13th with regard to income taxes: https://taxfoundation.org/which-states-have-most-progressive-income-taxes-0/

This article, while lacking in actual data, seems to confirm that Minnesota is also highly progressive in terms of overall tax burden (and one of the top states in that regard): http://time.com/money/3667280/unfair-taxes-washington-state/

We’ve also been moving in the right direction. This report shows Minnesota as the #1 state in improving progressiveness from 2011-2014: http://www.taxpolicycenter.org/sites/default/files/publication/131621/2000847-federal-state-income-tax-progressivity.pdf

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