Minnesota one of the worst states for individual income taxes: report

Minnesota is right up there with Washington D.C., Maryland, New Jersey, New York, Connecticut, California, and Hawaii.

The Minnesota State Capitol in the winter. (Minnesota Department of Administration/Flickr)

A new report further confirms that Minnesotans are some of the most highly-taxed people in the United States.

Tax Foundation, a politically independent nonprofit devoted to analyzing tax policies, ranked Minnesota as the eighth-worst state in the U.S. for individual income tax — right up there with Washington D.C., Maryland, New Jersey, New York, Connecticut, California, and Hawaii.

According to Tax Foundation, U.S. states that perform poorly on their individual income tax analysis “tend to have high tax rates and very progressive tax structures.” The report also makes a connection between individual income tax and the health of a state’s overall business climate.

“High marginal rates adversely affect labor output and investment, and can influence location decision-making, especially in an era of enhanced mobility, where it is easier for individuals to move without jeopardizing their current job, or without limiting the scope of their search for a new one,” the report says.

In reaction, Minnesota GOP Chairman David Hann released a statement calling on Democrats to work across the aisle and lighten the tax burden on Minnesotans.

“This report shows we have some of the highest taxes in the country. Just days ago, Democrats forced a massive tax increase on workers and businesses — while inflation is at record highs, forcing Minnesotans to pay more for the things they need every day, like gas, groceries, utility bills and more,” he said. “Meanwhile, Minnesota has a record-breaking budget surplus of more than $9 billion.”

“How much more proof do Democrats need to realize that Minnesotans are overtaxed? Enough is enough. It is time for Democrat lawmakers to act on Republican proposals to provide real, meaningful tax relief to Minnesota families and businesses,” he added.

Tax Foundation’s report, released last Tuesday, emerged just three days before Montana Gov. Greg Gianforte wrote an open letter to Minnesota small business owners that encouraged them to relocate.

“I write to offer you greater tax and regulatory certainty as well as a business-friendly climate in Montana,” he said. “With the Minnesota unemployment insurance trust fund in debt and state government unable to fix it, I understand you are facing higher taxes that will shrink your bottom line, will prevent you from growing your business, and could cost Minnesota jobs.”

Gianforte, however, did not cite the Tax Foundation report, but a report from The Blueprint that dubbed Montana the best state for starting a small business. According to Tax Foundation, Montana is firmly in the middle of the pack vis-a-vis individual income tax rates.