This national study finds that while Minnesota’s system treats low- and middle-income families fairer than does the overall national average of the states, its tax system still is significantly regressive. This finding is consistent with the most recent results of the Tax Incidence Study conducted by the Minnesota Department of Revenue.
The study added up state and local taxes. It found that for Minnesota families:
• One-fifth earn under $23,000 a year. They pay on average 9.2% of their income in state and local taxes.
• One-fifth at the middle earn between $40,000 and $62,000 a year. They pay on average 10.3% of their income in Minnesota taxes.
• The top one percent, with average incomes of $1,607,000, pay on average 7.7%.
On average, a dollar earned by the bottom fifth is taxed at 9.2%, at 10.3% at the middle, but only a 7.7% at the very top of incomes.
The study found national tax-rate average of the states is 11% at the bottom one-fifth of income, 9.7% at the middle and only 6.4% at the very top. In some states, such as Florida, with no individual income tax, middle-income families pay on average a state and local tax rate 300% greater than those at the top. Florida also faces recession levels much higher than the national average.
Growing more regressive
Minnesota’s system has become more regressive in recent years with permanent income tax cuts aimed disproportionately at those with very high income. In turn, regressive property tax increases were required to make up for the lost revenue.
Minnesota’s individual income tax itself is now much less progressive than before.
“The state’s income tax now is not enough to offset the unfair impact of the other taxes,” said Matthew Gardner, ITEP’s executive director and lead author of the study, entitled “Who Pays? A Distributional Analysis of the Tax Systems in All 50 States.”
“Minnesota has an unfair, regressive tax system,” Gardner said. “Relying more on income taxes, and less on regressive taxes, could make the Minnesota system substantially less unfair.” In recent years, the Minnesota Legislature has adopted legislation that would reduce the tax disparity by removing income tax cuts still in place for those with highest incomes, but those measures have been vetoed by Governor Pawlenty.
ITEP, a Washington D.C. research group, conducts the Who Pays? national study every few years. This year’s study uses 2007 tax law updated to reflect permanent changes in law enacted through October 2009. ITEP is a research partner with Citizens for Tax Justice. The study is funded by a group of foundations, including the Annie E. Casey Foundation and the Ford Foundation.
For more information
View the full report (pdf file)
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This national study finds that while Minnesota’s system treats low- and middle-income families fairer than does the overall national average of the states, its tax system still is significantly regressive. This finding is consistent with the most recent results of the Tax Incidence Study conducted by the Minnesota Department of Revenue.
The study added up state and local taxes. It found that for Minnesota families:
• One-fifth earn under $23,000 a year. They pay on average 9.2% of their income in state and local taxes.
• One-fifth at the middle earn between $40,000 and $62,000 a year. They pay on average 10.3% of their income in Minnesota taxes.
• The top one percent, with average incomes of $1,607,000, pay on average 7.7%.
On average, a dollar earned by the bottom fifth is taxed at 9.2%, at 10.3% at the middle, but only a 7.7% at the very top of incomes.
The study found national tax-rate average of the states is 11% at the bottom one-fifth of income, 9.7% at the middle and only 6.4% at the very top. In some states, such as Florida, with no individual income tax, middle-income families pay on average a state and local tax rate 300% greater than those at the top. Florida also faces recession levels much higher than the national average.
Growing more regressive
Minnesota’s system has become more regressive in recent years with permanent income tax cuts aimed disproportionately at those with very high income. In turn, regressive property tax increases were required to make up for the lost revenue.
Minnesota’s individual income tax itself is now much less progressive than before.
“The state’s income tax now is not enough to offset the unfair impact of the other taxes,” said Matthew Gardner, ITEP’s executive director and lead author of the study, entitled “Who Pays? A Distributional Analysis of the Tax Systems in All 50 States.”
“Minnesota has an unfair, regressive tax system,” Gardner said. “Relying more on income taxes, and less on regressive taxes, could make the Minnesota system substantially less unfair.” In recent years, the Minnesota Legislature has adopted legislation that would reduce the tax disparity by removing income tax cuts still in place for those with highest incomes, but those measures have been vetoed by Governor Pawlenty.
ITEP, a Washington D.C. research group, conducts the Who Pays? national study every few years. This year’s study uses 2007 tax law updated to reflect permanent changes in law enacted through October 2009. ITEP is a research partner with Citizens for Tax Justice. The study is funded by a group of foundations, including the Annie E. Casey Foundation and the Ford Foundation.
For more information
View the full report (pdf file)