Minnesota doing better on taxes than much of the Midwest

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.

Sponsor Content


All-access pass to top stories, events and offers around town.

Sign Up >

No Thanks!

Remind Me Later >