Minnesota taxes by the numbers

Any discussion about taxes in Minnesota inevitably begins with a statement of where the state ranks compared to the rest of the nation. According to a report today from the Minnesota Taxpayers Association, Minnesota ranks 13th. And 21st. And 15th. And 32nd.

In its annual “How Does Minnesota Compare” study (available here), the MTA says the state has dropped from 12th to 13th in total state and local tax collections, based on data from fiscal year 2008.

On a per-thousand-dollars-of-personal-income basis, however, the state ranks 21st.

Minnesota ranks 15th in per capita spending, and 31st in spending on a per-thousand-dollar-of-income basis.

The report also compares areas of spending with other states. Minnesota spends about the same amount on K-12 as other states. It spends more on libraries, welfare, highways, and natural resources.

It spends less than the U.S. average on fire, corrections, sewer, health and hospitals, financial administration, justice, public buildings, and interest on general debt.

There are a few surprises for the non-financial follower. Minnesota, which some politicians claim has the highest corporate tax rate in the world, ranks 11th in per capita corporate income taxes. Alaska ranks #1.

And several states described as “business friendly,” have a high sales tax burden for its residents. On a per-capita basis, Wyoming, Florida, Nevada, Arizona, New Mexico, and South Dakota — all often mentioned as more desirable tax states — have higher sales tax burdens than Minnesota, the report says.

But Minnesota’s reputation as being a high welfare state also is confirmed by the report. It ranks sixth.

  • John O.

    Don’t overlook what has happened to property taxes, however. According to the MTA report, Minnesota’s property tax collections per capita have gone from 28th in 2004 to 21st in 2008.

    Measuring property taxes in Minnesota on a per $1,000 of income is a meaningless statistic since there is no direct correlation between one’s income and property values/taxes. A millionaire could live in an apartment and have, therefore a very small share of the property tax bill, while persons on fixed incomes (like my retired parents) live in their own house with a higher property tax (but no mortgage). You also have to take into account the variations in school district tax collections and any excess levies.

    Unlike an income tax where documentation exists that substantiates most of one’s earnings, the property tax is based on an estimated value that can include a multitude of variables affecting its relative “value.”

    Comparing sales tax collections is also a dicey proposition. Minnesota does not tax food or clothing but many other states do. Local sales tax rates will also vary from community to community and state to state.

    In the end, these are general indicators, but a business considering expanding is going to do a lot more thorough analysis.