- Taxable income above $250,000 for married couples & $150,000 for singles will be taxed at a new, higher rate of 9.85%
- Taxes on cigarettes will go up by $1.60 per back
- Because the funding mechanism (new gaming revenue) has not produced the revenue as projected to fund the new Vikings' stadium, the state general fund will provide the backup funding if revenues do not pick up.
- The state will lower the State Unemployment tax on businesses by about $350 million
Some things that were debated but the legislature could not come to an agreement included:
- Sales tax on clothing - will remain tax-free
- 'Snowbird' tax - The state will not capture taxes from someone who lives 1/2 year in MN & 1/2 year in another state
- Sports memorabilia tax - no increased sales tax imposed
- Alcohol tax - no increase imposed
- Gas tax - not increased
All in all, the bill is set to impose an additional $2.1 billion tax increase on Minnesota citizens. By raising the top income tax rate to 9.85%, Minnesota becomes one of the highest tax states in the country. If you combine 9.85% with the highest federal rate (39.6%), one reaches nearly 50% tax (49.45%). This will provide a disincentive for forming a new business in Minnesota.
Business people and risk-takers are very sensitive to tax rate increases. One wonders what the impact will be on driving capital out of the state. The state of Minnesota is surrounded by states that are going in the opposite direction (ND, SD, Wisc). These states are 'open for business'. Minnesota is set to push businesses out.
LFC will be keeping an eye on the number of businesses that decide to relocate in a more business-friendly state. This new tax legislation may make the decision easier for businesses contemplating such a move.
Source: Star Tribune
