The Big Story Blog

Where Minnesota looks the worst on business taxes

Posted at 12:28 PM on December 29, 2011 by Paul Tosto
Filed under: Economy, Taxes

It's the report that gives Minnesota policy makers heartburn.

The State Business Tax Climate Index published by the Tax Foundation, tags Minnesota as among the worst states in the country when it comes to business taxes.

worstclimate.jpg

Rochester Sen. Dave Senjem, Minnesota's new Senate Republican leader, didn't mention the Tax Foundation by name Wednesday on MPR News. But he said that jobs and the economy would be the Republicans' top priority in the coming legislative session and that, "when youre about 43rd or 44th best in the country in terms of business climate, you know you've got some work to do....it's no secret we're among the most highly taxed states in the country.

Minnesota gets slammed by the Tax Foundation for a bunch of things, including having an alternative minimum tax on individuals and companies, a relatively high sales tax and corporate income tax.

There's no question the Tax Foundation analysis makes Minnesota look bad when it comes to business and taxes. But there are many other analyses examining tax structures by state that show Minnesota at least better than the national average and, in several cases, among states with the most business friendly tax structure.

The question then: Is the Tax Foundation analysis better than all those other reports or is it an outlier?

The Minnesota Department of Employment and Economic Development has a great tool to compare taxes and other business issues among states.

Here's a look at business taxes as a percentage of private sector economic activity in fiscal 2010.

State
Rank
Connecticut3.3%1
Delaware3.7%2
Maryland3.7%2
North Carolina3.7%2
Oregon3.8%5
Utah3.9%6
Virginia4.0%7
Indiana4.1%8
Georgia4.2%9
Missouri4.2%9
Massachusetts4.3%11
Idaho4.3%11
Arkansas4.3%11
South Dakota4.3%11
Minnesota4.4%15
Colorado4.4%15
New Hampshire4.4%15
Tennessee4.5%18
Ohio4.6%19
Wisconsin4.6%19
Michigan4.6%19
Iowa4.6%19
Alabama4.6%19
South Carolina4.8%24
Pennsylvania4.8%24
Kentucky4.9%26
New Jersey4.9%26
Nebraska4.9%26
District of Columbia5.0%29
Illinois5.0%29
Arizona5.0%29
Oklahoma5.0%29
Texas5.1%33
California5.2%34
Nevada5.2%34
Louisiana5.3%36
Washington5.4%37
Rhode Island5.5%38
Hawaii5.5%38
Kansas5.5%38
Montana5.9%41
Mississippi6.0%42
New Mexico6.0%42
New York6.2%44
Florida6.3%45
West Virginia6.7%46
Maine6.8%47
Vermont7.1%48
Wyoming8.1%49
North Dakota8.6%50
Alaska13.3%51
United States5.0%----

Minnesota's effective business tax rate is significantly lower than the national average, competitive with Wisconsin and South Dakota and dramatically better than North Dakota.

I like that comparison best because it shows taxation in the context of how much business gets done by companies. While Minnesota's business tax rates may be high, they appear to be a very affordable cost of doing business.

What's the best way to look at Minnesota's tax competitiveness?


About Paul Tosto

Paul Tosto

Paul Tosto writes the Big Story Blog for MPR News. He joined the newsroom in 2008 after more than 20 years reporting on education, politics and the economy for news wires and newspapers across the country.