Minnesota Ranks Among States with Highest Income Tax, New Report Shows

Minnesota ranks among states with the highest income tax, a new report from the Tax Foundation shows.

The organization, a nonpartisan nonprofit that analyzes tax policies from each state, ranked the governments based on the impact of their individual income taxes, as Minnesota was placed at number 43 in the country.

“The individual income tax is important to businesses because states tax sole proprietorships, partnerships, and in most cases limited liability companies (LLCs) and S corporations under the individual income tax code. However, even traditional C corporations are indirectly impacted by the individual income tax, as this tax influences the location decisions of individuals, potentially impacting the state’s labor supply, and higher individual income taxes increase the price of labor,” the group detailed.

States that scored at the top of the list have no income tax and limited payroll taxes, including Alaska, Florida, South Dakota, and Wyoming.

According to the organization, low taxes can improve labor output and investment and encourage individuals to relocate to the state.

However, Minnesota is close to New York, California, New Jersey, Connecticut, and Hawaii. These states’ tax policies heavily impact individuals.

“States that score poorly on this component tend to have high tax rates and very progressive bracket structures. They generally fail to index their brackets, exemptions, and deductions for inflation, do not allow the deduction of foreign or other state taxes, penalize married couples filing jointly, do not include LLCs and S corporations under the individual income tax code (instead taxing them as C corporations), and may impose an alternative minimum tax (AMT),” the report explains.

Amid a record budget surplus, many Republicans in the state legislature have called for tax cuts to ease the burden on residents throughout the state.

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Cooper Moran is a reporter for The Minnesota Sun and The Star News Network. Email tips to [email protected]
Photo “Minnesota State Capitol” by Michael Hicks. CC BY 2.0.

 

 

 

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