Minnesota Taxes in Comparison

Minnesota Taxes in Comparison

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State –Local Tax Mix: Minnesota v. U.S.

Relatively less reliance on property tax29 percent vs. 33 percentRelatively less reliance on general sales taxes19 percent vs. 23 percentRelatively greater reliance on personal income taxes29 percent vs. 21 percent


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State-Local Tax Mix: Minnesota vs. Great Lake States

Relatively less reliance on property taxes30 percent vs. roughly 40 percent in Illinois, Michigan and Wisconsin; Minnesota

has least reliance in the regionRelatively less reliance on general sales taxes19 percent vs. 25 percent in Indiana, Iowa, and Michigan; Wisconsin and Illinois

about equal to MinnesotaRelatively greater reliance on personal income taxes29 percent vs. 17 percent in Illinois and Michigan; Minnesota is highest with

Indiana, Iowa and Wisconsin at about 25 percent


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Minnesota vs. U.S.

State taxes only – Compared to the U.S.Sales tax reliance – 26 percent vs. 31 percentPersonal income tax reliance 40 percent vs. 35 percentLocal taxes only – Compared to the U.S.Property tax reliance – 93 percent vs. 74 percentSales tax reliance – 2 percent vs. 11 percentState taxes only – Compared to the Great LakesProperty taxes – 4 percent; only Michigan also has state property taxGeneral sales tax – 25 percent is lowest in the region; 40 percent in Indiana and

MichiganPersonal income taxes – 41 percent (highest along with Wisconsin)Local taxes – Compared to the Great LakesMinnesota is the highest; Illinois, Iowa and Wisconsin share sales


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Tax Burdens: 1977 – 2009 [Taxes as Percent of Personal Income]

State – Local Taxes1977 – 2002 – Minnesota generally exceeds U.S. average and other states in the

region (except Wisconsin) by considerable margin2005 – 2009 – Minnesota runs steady at about 10.8 percent of personal income;

effectively equal to U.S. average and near the middle of Great Lakes States

State Taxes OnlyMinnesota at roughly 8.0 percent of personal income consistently above U.S.

average (6.0 percent) and at highest among states in the region


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Structural Characteristics

Corporate Income TaxTax rate is relatively higher: 9.8 percent vs. 6.0 – 8.0 percent (roughly)Personal Income TaxTax rate is generally higher 7.5+ percent (equivalent to Wisconsin), compared to

flat rates in Indiana and Illinois. Phase-out of exemptions and deductions has substantial effect

General Sales TaxRate is near the upper end of the regionBase with food and clothing exempt is relatively more narrowTax relatively large number of services – most of which are classified as servicesLikely tax manufacturing equipment and utilities a bit more as well as other

business inputs


State-Local Tax Mix: Minnesota and U.S.Percentage Distribution of State and Local Taxes -- 2009

Ppty.33%

Gen. Sales23%Sel.

Sales11%

Ind. Inc.21%

Corp. Inc.4%

Other8%

U.S.

Ppty.29%

Gen. Sales19%

Sel. Sales13%

Ind. Inc.29%

Corp. Inc.3%

Other7%

Minnesota

Source: Bureau of the Census


State – Local Tax Mix: Upper MidwestPercentage Distribution of State and Local Taxes in Selected States – 2009

U.S.

Minnesota

Illinois

Indiana

Iowa

Michigan

Wisconsin

33.4

29.5

40.1

30.3

33.2

40.1

38.3

22.9

18.7

19

26

23.6

25.1

18.2

11.2

13.1

15.6

11.7

10.6

10.5

11

21.3

28.9

16.2

23.9

23.5

17.5

24.8

3.6

3.2

3

3.5

2.2

2

2.7

7.7

6.5

6

4.7

6.8

4.9

5.1

Property Gen. Sales Sel. SalesInd. Inc. Corp. Other



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State Tax Mix: U.S. and MinnesotaPercentage Distribution of State Taxes -- 2009

Ppty.4%

Gen. Sales25%

Sel. Sales17%

Ind. Inc.40%

Corp. Inc.4%

Other8%

MinnesotaPpty.2%

Gen. Sales31%

Sel. Sale

s16%

Ind. Inc.35%

Corp. Inc.6%

Other10%

U.S.



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Local Tax Mix: U.S. and MinnesotaPercentage Distribution of Local Taxes – 2009

Ppty.74%

Gen.

Sales11%

Sel.

Sales5%

Ind.

Inc.4%

Corp. Inc.1%

Other4%

U.S. Minnesota



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State Tax Mix: Upper MidwestPercentage Distribution of State Taxes in Selected States – 2009

U.S.

Minnesota

Illinois

Indiana

Iowa

Michigan

Wisconsin

1.8%

4.2%

0.2%

0.1%

0.0%

9.5%

0.9%

32.0%

25.5%

31.9%

41.6%

31.5%

39.5%

28.3%

16.2%

17.4%

21.9%

17.8%

15.3%

15.4%

17.7%

34.4%

40.5%

31.4%

28.9%

38.7%

25.7%

41.3%

5.5%

4.5%

5.8%

5.6%

3.8%

3.1%

4.5%

10.1%

8.0%

8.8%

5.9%

10.7%

6.7%

7.2%

Property Gen. Sales Sel. SalesInd. Inc. Corp. Other



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State-Local Tax Burden Over TimeState-Local Taxes as Percent of Personal Income – Various Years

1977

1982

1987

1992

1997

2002

2004

2005

2006

2007

2008

2009

8.0%8.5%9.0%9.5%

10.0%10.5%11.0%11.5%12.0%12.5%13.0%

USMNILINIAMIWI



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State Tax Burden Over TimeStateTaxes as Percent of Personal Income – Various Years

1977

1982

1987

1992

1997

2002

2004

2005

2006

2007

2008

2009

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

USMNILINIAMIWI



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Corporate Income Tax Features

Minnesota Illinois Indiana Iowa Michigan Wisconsin

Rates9.8% 9.5%

8.5% (8.0% on 7/1/12)

6.0-12.0% 6.0% 7.9%

Combined Reporting Required

Yes Yes No (DoR Authority) No Yes Yes

NOL Carryback -0- -0- -0- -0- -0- -0-

NOL CarryForward 15

-0- (Suspended to 2014)

20 20 10 15

Sales Factor

93% (100% in 2014) 100% 100% 100% 100% 100%

Sourcing Services Market Market COP Market Market Market

Source RIA Checkpoint


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Personal Income Tax Characteristics

Minnesota Illinois Indiana Iowa Michigan Wisconsin

Rates 5.35% - 7.85% 5% 3.4%

0.36% - 8.98%

(Fed Tax Deduct)

4.35% 4.6%-7.75%

Starting point

Federal Taxable

Federal AGI

Federal AGI

Federal AGI

Federal AGI

Federal AGI

Personal Exempt

Same as Fed. with addback

$2,000

$1,000 / $1,500

(depend. child)

$40 Credit $3,700 $700

Standard Deduction

Same as Fed. with addback

N/A N/A $4,460 (MFJ) N/A Variable

Source: RIA Checkpoint


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Sales Tax Characteristics

Minnesota

Illinois Indiana Iowa Michigan Wisconsin

Rate (State) 6.875% 6.25% 7% 6% 6% 5%

Food Exempt Yes Taxed at

1% Yes Yes Yes Yes

Mfct. M&E Equipment

No (Some

refunds)Yes Yes Yes Yes Yes

Mfct. Utilities ExemptNo. of Services Taxed (FTA)

66 17 94 94 26 76

Local Sales Taxes

23 entities

(1% max)

320 entities (2.75% max)

-0- 200+ entities (1% max) -0- 71 entities

(0.5% max)

SST Member Yes No Yes Yes Yes Yes


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PresenterHarley Duncan

Washington National TaxManaging Director

[email protected] 202-533-3254

Documents

Minnesota Taxes in Comparison