Is Minnesota’s Wealth Exodus Harming Nonprofits?

Over the course of the last two weeks, Alpha News has examined Minnesota’s great wealth exodus as well as how Governor Dayton’s policies are harming the state’s business climate.  It appears that nonprofit organizations are being affected by this “wealth exodus” as well.  The Mayo Clinic, the University of St. Thomas, and Fairview Health Services are just a few of the many nonprofits that call Minnesota home and work everyday to improve the lives of Minnesotans and people across this nation.

A groundbreaking study by the Center of the American Experiment found that Minnesotans are leaving the state for less-taxed states.  The study shows that those leaving are typically high-earners in their “prime earning years.” How does this affect Minnesota’s nonprofits?

There are multiple reasons nonprofits in Minnesota are feeling pinched, but most of which can be traced to the 2013 tax package signed into law by Governor Dayton, according to a piece published in Twin Cities Business Magazine. The tax package lowered the threshold for the top income tax bracket, thereby increasing the tax amount paid by the state’s top tax bracket by 25%. The article claims that this leads to individuals cutting ties with not only the state, but with its charities as well, explaining, “While the Department of Revenue states that it does not consider where one donates as one of its 26 factors in weighing whether an individual owes Minnesota taxes, wealthier residents, when deciding to move to another state, are more frequently opting to sever all ties here, including charitable giving.”

Twin Cities Business points to the fact that 15% of top donors have severed ties with Twin Cities’s United Way funding, where top tier donors make up 40% of the revenue, as just one of the many examples that display wealthy donors taking their charitable donations outside of the  state.

Another way that Minnesota nonprofits are being harmed by the wealth exodus from the state is the estate tax. Under current state law, when an individual’s estate is over $1.4 million dollars, an individual’s tangible assets are inflicted with  10%-16% estate tax when they die. Generally, wealthy individuals leave a certain amount of money for a charity or organization.  The liquidation of one’s assets after death is sometimes followed by large scale donations.  Those same donations then are lessened due to the estate tax. Minnesota is one of only 14 states that still have an estate tax.

Minnesota policymakers face many decisions in the years to come, including whether or not they want the state to be an environment that fosters the growth of Minnesota’s nonprofit sector.  Subscribe to Alpha News to learn what Minnesotans think about the state’s wealth exodus next week.



Blake Kraussel