Minnesota maintains position as one of the worst states for business taxation

Every year, the Tax Foundation publishes the State Business Tax Climate Index, which ranks states on how well they tax businesses. The study not only looks at rates, but also at how well tax systems are structured to minimize things like complexity and non-neutrality. In the past 5 years, Minnesota has ranked either 45th or 46th among the states when it comes to business taxation.

This year, the results are no different. Minnesota ranked the 46th best state for business taxation.

Much like previous years, the main issue is our high rates of income taxation. 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, is a source of complexity.

Indeed, numerous other factors apart from taxation affect business creation, job growth, and overall economic growth. But ample evidence exists 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.