Minnesota maintains position as one of the worst states for business taxation
Every year, the Tax Foundation publishes the State Business Tax Climate Index. The study ranks states not only on how much taxes they impose on businesses, but how well tax systems are structured to minimize issues such as complexity and non-neutrality. For the past 5 years, Minnesota has ranked as the state with the country’s fifth or sixth-worst business tax climate.
This year, the results are no different. Minnesota ranked the 46th best or fifth-worst state for business taxation.
As with previous years, the main driver for the state’s abysmal ranking is its high income tax rates. Currently, Minnesota is tied with Iowa for the third-highest corporate income tax rate in the country. Minnesota’s top individual income tax rate is the fifth-highest in the nation.
One other issue that affects such rankings is how complex the tax code is. Businesses and individuals incur higher costs when navigating a complex tax code compared to one that is less complex. And some features of the Minnesota tax code, for example, the Alternative Minimum Tax, are a source of complexity.
Indeed, numerous factors apart from taxation affect business creation, job growth, and overall economic growth. Evidence exists, however, showing that taxes significantly affect economic activity.
At a time when a lot of states are making efforts to reform and reduce their tax burdens, this new report should serve as a reminder of just how far behind Minnesota is compared to other states.