Latest Posts

Home

Facebook

Twitter

Search
About

Minnesota ranks 8th nationally for its reliance on income taxes

The individual income tax is one of the main sources of revenue for states. For fiscal year 2015, the latest year of data available, it made up 23.5% of total U.S. state and local tax collections. The individual income tax ties with the general sales tax as the second largest source of state and local tax revenue after the property tax.

The Tax Foundation shows how the states rank in terms of their reliance on individual income tax revenues. Minnesota ranks 8th nationally. Here, individual income taxes generate 31.8% of total state and local tax collections.

From an economic perspective, this is not a good thing. Evidence suggests that income taxes tend to be more harmful to economic growth than consumption taxes and property taxes. Income taxes affect labor participation, saving, and investment. Consumption taxes, by contrast, such as sales taxes, tax what people spend as opposed to what they earn. Minnesota ranks 36th nationwide on the share of total state and local tax collections that comes from both sales taxes and property taxes.

As the Tax Foundation write,

under the system in place in most states, if you earn money from wages and invest it, those wages will effectively be taxed twice—once when you collect the wages, and again when your investment yields a profit. Consumption taxes, on the other hand, are more neutral, and only tax what you spend money on, therefore only taxing wages once. Further, since many households see their personal income change with the business cycle, the individual income tax tends to generate a less stable source of revenue than other forms of taxation.

In short, Minnesota’s tax system is overly reliant on sources of revenues which are less stable than others and more harmful to economic growth.

John Phelan is an economist at the Center of the American Experiment. 

Comments

Subscribe

Categories

Upcoming Events

  • YLC Curling Event

    Location: Chaska Curling Center 3210 Chaska Blvd, Chaska, MN 55318

    Grab your broom and stone and join the Young Leadership Council for an evening of Curling at the Chaska Curling Center! $40 registration includes: Instruction Ice time and equipment Appetizers (Curling Center Bar will be available to purchase drinks) The event will begin with 15-20 minutes of classroom instruction on curling rules and basics followed by 20-30 minutes on the ice for practice and drills. Instructors will be on hand the whole evening to guide your games. Dress Code: Bring a pair of clean-on-the-bottom shoes to change into. No leather soles or metal lace hooks Loose fitting or strechy clothes…

    Register Now
  • The Diversity Delusion

    Location: Hilton Minneapolis 1001 South Marquette Avenue Minneapolis, MN 55403

    Please join Center of the American Experiment on Wednesday, April 24th at the Hilton Hotel for a lunch forum with Heather Mac Donald as she discusses her new book, The Diversity Delusion: How Race and Gender Pandering Corrupt the University and Undermine Our Culture.  Heather Mac Donald is the Thomas W. Smith Fellow at the Manhattan Institute, a contributing editor of City Journal, and a New York Times bestselling author. She is a recipient of the 2005 Bradley Prize. Mac Donald’s work at City Journal has covered a range of topics, including higher education, immigration, policing, homelessness and homeless advocacy, criminal-justice reform, and race…

    Register Now
  • 2019 Annual Dinner Featuring Nigel Farage

    Location: Hilton Minneapolis 1001 South Marquette Avenue Minneapolis, MN 55403

    Purchase Tickets Here

    Register Now