Taxing Our Businesses To Death?

Much has been said, this week, about the impact of the Delta/Northwest merger on the Minnesota economy. There was much wailing and gnashing of political teeth about the announcement that there was "no chance" of the corporate headquarters of the combined entity staying in Minnesota. While the loss of jobs from Northwest (and 3M moving another operating unit out of the state) is important, small business is the heart and soul of the Minnesota economy and the small business environment in Minnesota is not a healthy one (H/T TN reader James)x when it comes to taxes.

The Small Business & Entrepreneurship Council's "Business Tax Index 2008" ranks the states from best to worst in terms of the costs of their tax systems on entrepreneurship and small business. The Index pulls together 16 different tax measures, and combines those into one tax score that allows the 50 states and District of Columbia to be compared and ranked.The 16 measures are:
1) state's top personal income tax rate, 2) state's top individual capital gains tax rate, 3) state's top corporate income tax rate, 4) state's top corporate capital gains tax rate, 5) any added income tax on S-Corporations, 6) whether or not the state imposes an alternative minimum tax on individuals, 7) whether or not the state imposes an alternative minimum tax on corporations, 8) whether or not the state's personal income tax brackets are indexed for inflation, 9) property taxes, 10) consumption-based taxes (i.e., sales, gross receipts and excise taxes), 11) whether or not the state imposes a death tax, 12) unemployment tax, 13) whether or not the state has a tax limitation mechanism, 14) whether or not the state imposes an Internet access tax, 15) gas tax, and 16) diesel tax.
The 15 best state tax systems are: 1) South Dakota, 2) Nevada, 3) Wyoming, 4) Washington, 5) Florida, 6) Alaska, 7) Texas, 8) Colorado, 9) Alabama, 10) Mississippi, 11) South Carolina, 12) Tennessee, 13) Missouri, 14) Ohio, and 15) Virginia.
The 15 worst state tax systems are: 37) North Carolina, 38) Nebraska, 39) West Virginia, 40) Hawaii, 41) Idaho, 42) Vermont, 43) Massachusetts, 44) New York, 45) Rhode Island, 46) Maine, 47) Iowa, 48) California, 49) Minnesota, 50) New Jersey, and 51) District of Columbia.

Emphasis mine.


Breaking down the individual measures. Minnesota ranks 44th worst in the nation in the personal income tax rate (put another way we are the 8th highest in the country), 46th (or 6th highest rate) in personal capital gains tax rate, 48th (4th highest) corporate tax rate, 48th in corporate capital gains tax....the ONLY place where we break out of the bottom 10 is when we get to personal property taxes (based on a share of personal income) - there we are actually the 17th best in the country and State/Local Sales, Gross Receipts and Excise Taxes where we rank 20th but that was based on 2004/2005 - prior to the Twins Stadium and Transportation Bill sales tax increases!


Contrary to what Minnesota 2020 tells us, Jason Lewis is correct when he says that Minnesota's tax environment is almost the worst in the nation! We are taxing our citizens and our businesses out of the state. We need to pressure our legislators into doing the right thing for people of Minnesota.