Minnesota doing better on taxes than much of the Midwest

Categories: Taxes

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It's a common trope you hear about Minnesota: The state's parks, infrastructure, and education are all great. But taxes? They can sometimes be just too high.

Well, it may be time to rethink that notion. A new study -- from a libertarian-leaning think tank, no less -- says that compared to some other Midwestern states, Minnesota's taxes are just fine.

See also:
Here's why Minnesota's relatively high tax rate isn't necessarily a bad thing

We've covered Minnesota's taxes before, noting that the state's relatively high tax rate is actually a good thing, as we're getting a solid bang for our buck. Despite having to pay a little more, Minnesota's healthy, it's got some of the best schools in the nation, and the economy's performing decidedly better than average.

But the new study, from the free market-leaning MacIver Institute based in Wisconsin, shows that in many cases, you can save thousands by living in Minnesota instead of other Midwestern states, like Illinois, Wisconsin, and Iowa.

By just simply looking at tax rates, you'd think Minnesota would fall behind others in the Midwest. Our state has an income tax that can get close to 10 percent, and the roughly 7 percent sales tax is high, as well. Those taxes can hurt Minnesota renters, who can find better deals in nearby states like Michigan or Wisconsin.

But what makes Minnesota shine are its property taxes. Minnesota's property taxes average only about 1.05 percent. That's lower than most of the rates throughout the Midwest. And because of that, the group finds, homeowners can save big over their lifetime by staying in Minnesota. As an example, the study brings up a 40-year-old homeowner making about $75,000. That type of homeowner would end up with more than $50,000 more in lifetime wealth in Minnesota than Wisconsin, and more than $100,000 more than Illinois, due to lower taxes.

The idea that Minnesota's taxes are less than a state like Wisconsin's is surprising, especially when you hear a slew of GOP gubernatorial candidates who feel that Minnesota needs to become a little more like Wisconsin. Thomas Stinson, an economics professor at the U of M, says you can make that argument if you just look at one certain tax rate, like income tax, which can make Minnesota look worse. But that doesn't tell the whole story.

"Now our income tax or our sales tax may or property tax may or may not be lower, but it's the combination of all the taxes that you pay that is really the crucial point," Stinson says.

When all of that is put together, Stinson says, Minnesota ain't so bad.


Send your story tips to the author, Robbie Feinberg. Follow him on Twitter @robbiefeinberg.





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5 comments
joshwarren84
joshwarren84

The fact that you used "slew" as a descriptor, just shows how incredibly unprofessional the City Pages "journalists", and I use that term loosely, actually are.

ben42dover
ben42dover

Check out the state and local income tax burden rankings at the Tax Foundation, please NOTE that Minnesota is #6 CLOSELY BEHIND #5 Wisconsin. Wisconsin wants to improve their ranking. Minnesota democrats are trying to make ours worse.  Minnesota is trying to be #1. Wisconsin wants to be #20. If you actually read the MacIver report it's all about how the Wisconsin tax rates are hurting Wisconsin and that they need to change them. Use those Wisc numbers reported in the piece and you'll see why a 50 yr old couple earning $100,000 will save a quarter of a million over their lifetime by moving to Florida. http://taxfoundation.org/article/annual-state-local-tax-burden-ranking-fy-2011

prk166
prk166

I fail to understand why we should celebrate a system that doesn't fairly tax but placed burden of the states taxation on those who can't afford to buy a home.  Since when did being progressive mean those who struggle to get by should be taxed the most?

MicheleBachmann
MicheleBachmann topcommenter

Higher taxes means higher quality of life.  Seems like Minnesota has it figured out.  

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