NFIB: Minnesota's 9.8% corporate income tax is highest in nation

In 2024, Minnesota has the highest corporate tax rate in the United States at 9.8%.

The National Federation of Independent Business called on state lawmakers to create a tax system that reduces the burden on small business owners.

“While some might think the ‘high tax’ label as applying only to very blue states in the Northeast or on the West Coast, Minnesota has one of the worst overall tax burdens in the country,” NFIB Minnesota State Director John Reynolds said in a statement. “We rank in the bottom ten in major tax rates, a problem that Rudy Perpich campaigned on fixing 40 years ago.”

In Minnesota, most corporations – like most businesses regardless of how they’re organized – are small businesses. According to U.S. Census data, 65% of corporations have fewer than 20 employees and 80% have fewer than 100 employees.

“Minnesota lawmakers needs to give Main Street a break,” Reynolds said. “If legislators won’t reduce Minnesota’s exorbitant top tax rates, they can at least create a fair system that makes it easier for small businesses to grow, compete, and thrive in Minnesota.”

According to the nonpartisan Tax Foundation’s 2024 Business Tax Climate rankings, Minnesota remains among the least friendly states for business taxes.

Four years ago, Iowa had the highest corporate tax rate in the country at 12% but has since dropped it to a flat 5.5% and individual rates to a flat 3.9% in 2026.

According to the Tax Foundation, Minnesota features the 12th highest average state and local tax burden in the country, by far the worst among our neighbors. In 2022, the average Minnesotan paid $7,763 in state and local taxes per year. By comparison, the average:

Wisconsinite paid $6,231 (-$1,532 vs. MN)Iowan paid $6,086 (-$1,677 vs. MN)North Dakotan paid $5,403 (-$2,360 vs. MN)South Dakotan paid $5,196 (-$2,567 vs. MN)

Individual Income Taxes: Minnesota has four individual income tax rates, ranging from 5.35% to 9.85%. Minnesota’s top rate is the 6th highest in the country, while the bottom rate is higher than the top rate in half the country (including seven states with no income tax).

In Minnesota, 65% of corporations have fewer than 20 employees and 80 percent have fewer than 100 employees.

Minnesota has the 17th highest average state and local sales tax rate at 7.52%, also the highest among our neighboring states. This rank will worsen once the new, state-imposed 1 percent Metro Area Sales Tax hike is factored in.

In 2023, the Minnesota Legislature raised taxes by nearly $10 billion over the next four years. Major tax hikes include:

Vehicle Sales Tax: $234 million (effective 7/1/2023)Metro Area Sales Tax (1%): $2.8 billion (effective 10/1/2023)Vehicle Tabs: $788 million (effective 1/1/2024)Gas Tax Inflator: $420 million (effective 1/1/2024)Retail Delivery Tax: $189 million (effective 7/1/2024)PFML Payroll Tax: $3 billion (effective 1/1/2026)

In a recent NFIB Jobs and Small Business Economic Trends Reports, small business owners reported extremely high numbers of job openings they can’t fill (40%), labor quality, (24%), and inflation (22%) as top problems.

 

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