Minnesota now has the highest rate of corporate tax in the United States

Minnesota now has the highest rate of corporate tax in the United States. As the National Federation of Independent Business explains:

As of January 1, Minnesota’s corporate tax rate remains 9.8 percent. The previous highest corporate tax rate belonged to New Jersey, where the corporate rate dropped to 9 percent upon the expiration a 2.5 percent surtax on corporate income over $1,000,000 at the end of 2023.

And that 9.8% rate applies to the first dollar of “taxable income, essentially the profits of C corporations“: New Jersey’s 9.0% rate only kicks in at $100,000. This exempts a lot of small businesses in the Garden State, but they find no such relief in Minnesota:

In Minnesota, most corporations – like most businesses regardless of how they’re organized – are small businesses. According to U.S. Census data, 65 percent of corporations have fewer than 20 employees and 80 percent have fewer than 100 employees.

This might account for Minnesota’s relatively poor record of new business creation. Yesterday, I wrote about Governor Walz’ touting of a ludicrous CNBC ranking of states. This, instead, is the grim reality for Minnesota’s businesses.

The solution is not to adopt some new, lower rate in addition to the current rate. As the Tax Foundation notes, “A single-rate system minimizes the incentive for firms to engage in economically wasteful tax planning to mitigate the damage of higher marginal tax rates that some states levy as taxable income rises.” Instead, Minnesota must cut its corporate income tax rate.