Since 2000, Minnesota’s state and local taxes have become more regressive, meaning low and moderate income families shoulder a disproportionate share of the tax load. It’s a trend happening faster in Minnesota than nearly every other state, as our latest report, Minnesota’s Tax Fairness Retreat: A 50-State Study, highlights.
Using data from the Institute on Taxation and Economic Policy, we compared tax systems in all 50 states. In Minnesota, there is an increased reliance on property taxes-which are regressive-and decreased dependence on income taxes-which are progressive. These are the major forces pushing Minnesota toward becoming a more regressive tax state.
One of the main reasons for this shift is “no new taxes” state policy, which led to reductions in state revenue sharing with local governments, thereby forcing property tax hikes. The lowest 80 percent of renters and homeowners saw a significant rise in property tax rates since 2000, compared to a sizable drop for the state’s highest five percent of earners.
Overall, Minnesota’s middle-income earners pay 10.3 percent of their income in state and local taxes, compared to the state’s highest earners who pay 7.7 percent of their income in taxes. Minnesota’s income and consumption (sales and excise) taxes have also become slightly more regressivity since 2000.
As this report shows, efforts to reduce regressivity are not “socialism” or “class warfare,” but simple tax fairness.