Biden’s tax proposal will make Minnesota even less globally competitive

Biden wants to impose $4.7 trillion in new taxes on Americans. Specifically, he wants corporations and the richest Americans to pay their “fair share,” whatever that means.

It’s certainly unlikely that Biden will get all his wishes. If anything, under such a divided congress, the proposal is nothing more than a signal to his base of what his priorities are. Regardless, if enacted, these types of proposals would have serious consequences, so they are worth mulling over.

The Tax Foundation, for example, estimates that if Biden’s budget were to pass, taxes on income in the United States would surpass the average tax of the developed world, making us less competitive as a result.

Corporate incomes would see the biggest hike, going from 47.3 percent under current law to 66 percent — about 25 percentage points above the OECD average.

But while all Americans would be hit hard with these high taxes, some states will be hit especially hard. This is because states and localities impose varying levels of taxes on their residents. High-tax states would thereby face marginally higher taxes under Biden’s plan than low-tax states.

How Biden’s proposal would affect taxes in Minnesota

Minnesota is one of the most heavily taxed states in the state, as American Experiment has pointed out time and over again. Currently, our corporate income tax is the second highest in the state. And our top income tax rate is the seventh highest in the country. Even our bottom income tax rate is higher than the top rate in about half of states.

These taxes will get even higher, however, if Biden’s budget sees the light of day. In fact, according to calculations by the Tax Foundation, under Biden’s proposal, some Minnesotans would pay a marginal tax rate of about 50 percent on their income.

Currently, the U.S. imposes a top income rate of 36 percent. Combined with the average of state and local income tax rates, this gives the U.S. a top income tax rate of 42.8 percent.

But Biden wants to raise the federal top-income tax rate to 39.6 percent. Combined with the average of state and local income tax rates, the top rate comes up to 45.4. However, for Minnesota, with a top income tax rate of 98.5 percent, the top marginal tax rate paid by some of the richest Minnesotans would go up to 49.5 percent. This is over 4 percentage points above the national average, the sixth-highest rate in the country, and 7 percentage points higher than the OECD average.

Long story short, Minnesotans already face some of the highest marginal income tax rates in the developed world. Biden’s proposal would just make that worse.