(The central square) – Minnesota is ranked fifth in worst tax condition of states in the country, according to an October Tax Foundation report for 2021.
The state ranks behind New Jersey, California, New York and Connecticut, with a score of 4.26. Like those four other states, Minnesota has held its rank since at least 2019, according to the report. Unlike its peers, who have moved at least 0.01 points, Minnesota’s score has not changed at all over the past year.
Kentucky (ranked 19e best), Mississippi (32sd best), Montana (fifth best), New Hampshire (sixth best) and South Dakota (2sd best), are the other states that did not experience a change in score from 2020 to 2021.
The Tax Foundation report said Minnesota’s tax base causes “an unnecessary drag” on economic activity.
Gopher State’s corporate tax rank is the sixth highest (9.8%) as of July 1, 2020. Its personal income tax rank is the fifth highest , according to the report. Its highest income rate, 9.85%, is among the highest in the country, after California (13.3%), Hawaii (11%), New Jersey (10.75%) and Oregon. (9.9%).
Its state sales tax rate is 6.88%, which follows California (7.25% and includes an additional mandatory state-wide local tax) and a four-way link to the Indiana, Mississippi, Rhode Island and Tennessee (7%).
Minnesota’s local average rate is 0.58%, which is lower than that of Tennessee (2.55%) and California (1.43%) but higher than that of Mississippi (0.07%). Rhode Island and Indiana do not have a local sales tax.
Minnesota is one of 10 states that charge more than $ 3 in excise taxes per pack of cigarettes.
The report tied Minnesota for lack of full compliance with the federal deduction exhaustion schedule and an alternative minimum tax, which was intended to ensure that all taxpayers pay at least some taxes per year by creating a parallel tax system to accompany the standard corporate income tax code.
“Evidence shows that AMT does not increase efficiency or improve fairness significantly,” the report says. “It makes little money for the government, imposes compliance costs which in some years are actually higher than collections, and encourages companies to reduce or shift their investments (Chorvat and Knoll, 2002). As such, states that have emulated the federal AMT have placed themselves at a competitive disadvantage due to unnecessary tax complexity. “
Iowa, California, Kentucky, and New Hampshire also have AMT.
On the other hand, its sales tax rank (28e best), property tax rank (31st better) and the tax classification of unemployment insurance (32sd better) are more towards the center of the state pack.
The state joins New Hampshire, New Jersey, North Dakota and South Dakota in exempting most commercial tangible personal property from tax. Per capita property tax rates are $ 1,599 and 2.91% of personal income.
The state moved up two places in the UI tax rankings, from 34 to 32, last year. Its minimum rate is 0.10% and its maximum rate is 9%, with a taxable salary base of $ 35,000.
It offers tax credits for employment, research and development and investment.
Minnesota has a 15-year carry forward and unlimited carry forward cap for net operating loss deductions for its corporate income tax and corporate tax bases, effective July 1, 2020. States score high on the index if they comply with federal treatment (like South Dakota) or provide a strong system of carry-overs and carry-overs, according to the report.
“The longer the aggregate period, the higher the likelihood that corporate income tax will be levied on the average profitability of the business,” the report says. “Typically, states entered FY2021 with better treatment of deferral (up to a maximum of 20 years) than of deferral (up to a maximum of three years).”
North Carolina (15%) and Minnesota (20%) are the only two states that provide spending under Section 168 (k), as the others provide 0% or 100%. Both states comply with the limitation in Section 163 (j) and decoupling / 95% exclude Global Low Tax Intangible Income (GILTI).