It’s Our Surplus: Give It Back!

This week sees the launch of our new report, ‘It’s Our Surplus: Give It Back!: The case for permanent tax cuts for Minnesotans.’ In it, we argue that Minnesota’s politicians, who are forecast to take $7.7 billion more than they said they needed from the state’s taxpayers, leave that money in those hard-pressed taxpayer’s pockets by enacting significant, permanent cuts to our state’s personal income tax rates.

In short:

  • Minnesota’s state government is already spending at historically high levels. In 2020, Minnesota’s state government spent $4,348.20 for every state resident. This was the highest amount on record and was 5.9 percent higher than in 2016.
  • Minnesota’s state government spending is high compared to other states. In 2019, Minnesota ranked 14th in the United States in terms of direct state and local government expenditure per capita, 6.1 percent above the United States’ average.
  • These high levels of state government spending have not alleviated our social ills and spending more won’t change that. There should be no surplus-funded increase in spending.
  • Minnesota has the sixth-highest rate of state personal income tax in the United States. And, while the top rates for the District of Columbia (seventh highest), New Jersey, and California all kick in with incomes of $1 million annually and New York’s at $25 million, Minnesota’s starts at the relatively modest level of $166,040
  • Minnesota doesn’t just tax “the rich” heavily. Our lowest personal income tax rate is higher than the top rate of 24 states.
  • Our state ties for the third-highest corporate income tax rate in the United States. While Minnesota’s rate applies to the first dollar of taxable revenue, Iowa’s rate, which also ranks third, only kicks in at taxable income over $250,000 annually.
  • Minnesota is one of only twelve states and the District of Columbia to impose an estate tax.
  • Our state’s tax burden — state and local sales, property, and individual income tax rates as a share of Personal Income — ranked 6th highest in the United States in 2019.
  • Minnesota’s taxes are also needlessly complex. We are one of thirteen jurisdictions that don’t fully conform to the federal depletion schedule, one of only six to impose an Alternative Minimum Tax (AMT) on corporations, one of just five to impose an AMT for individuals, and one of fifteen to have a “marriage tax penalty” written into our tax code.
  • Research finds that high taxes, such as Minnesota’s, restrain economic growth. This partly accounts for our state’s below-average economic performance in recent years.
  • Studies also find that our state’s high taxes push residents out of Minnesota and deter others from moving here.

The surplus represents an opportunity to align taxes with economic growth and our report offers a number of options on how to do that.