Minnesota ranks 9th highest in state and local taxes

Minnesota is a high-tax state — this is not news. When looking at our state’s tax burden altogether, we are among the top 10 in the nation. Minnesota ranks high on both individual and corporate income taxes.

Looking only at state taxes, however, gives an incomplete picture of the state’s tax burden. Some states may have low state tax but higher local taxes. Thereby, analyzing the entire tax burden gives a much broader overview of the state burden across states.

So, how does Minnesota’s state and local tax burden rank?

According to the Tax Foundation, in 2018, Minnesota had the ninth-highest state and local tax collections per capita in the entire country.

Minnesota ranked higher than 3 of its neighbors — Wisconsin, Iowa, and South Dakota — and was only behind North Dakota. However, the tax burden is comparatively lower in North Dakota than in Minnesota because a significant portion of North Dakota’s tax revenue comes from the extractive industry. This means that among its neighbors, Minnesota potentially imposes the highest tax burden per capita.

For example, even though North Dakota ranks third for state and local tax collections, the resource-rich state generates a substantial part of its tax revenue from severance taxes on oil and natural gas, which are borne mainly by consumers outside North Dakota. As a result, North Dakota joins the ranks of high-tax states in terms of per capita collections even though the tax burden on North Dakotans is comparatively low.