The 2021 Golden Turkey Award
Minnesotans vote for the worst examples of government spending.
Every year, the Tax Foundation publishes the State Business Tax Climate, where they rank states depending on how friendly state taxes are to business. In addition to how much states collect in taxes, the report also looks at how well state tax systems are structured.
Between 2010 and 2021, Minnesota has consistently ranked in the bottom ten of these rankings, and 2022 was no different. According to the newest report, Minnesota is the 45th best state for taxation, the same position as last year.
Like in previous years, Minnesota performed worst on corporate and individual income taxes. For the most part, this is due to our high rates of taxation. Minnesota’s 9.8% corporate income tax rate is the third highest in the country, and Minnesota’s lowest individual income tax bracket rate is higher than the highest rate of about half of all states. Our tobacco and sales taxes are also high.
But apart from high tax rates, other factors make our tax system uniquely complex, further rendering it business-unfriendly. These include the Alternative Minimum Tax and the fact that our corporate tax system does not conform to the federal depletion schedule. As John Phelan has argued, if both of these were reformed, Minnesota could move up these tax rankings.
With a historic budget surplus that is partly driven by our high tax rates, our legislators have an opportunity to improve Minnesota’s business tax climate. They should seriously consider making changes that would lessen the complexity in our tax system, as well as reduce the overall tax burden on individuals and businesses.