A new report finds that Minnesota is bucking a national trend of increasingly regressive taxation. From 2013 to 2015, Minnesota has led a small minority of states (14) who improved their tax structure by laying higher burdens on higher-income taxpayers.
Using the metrics in this report, Minnesota still has a regressive tax system. Only three states have a net progressive tax system—California, Delaware, and Oregon. But Minnesota has risen from sixteenth to seventh least regressive over just the last couple years, while South Dakota has sunk further into the depths of the six most regressive states.
Ah, but if Minnesota goes taxing rich folks more, they’re going to gum up their economy, right?
Despite the concerns of naysayers, the reduction in tax regressivity resulting from the 2013 and 2014 tax acts does not appear to have damaged Minnesota’s economy, as the state continues to outperform the national average based on most key indicators. Furthermore, a correlation between these indicators and the degree of tax regressivity as measured by the Suits index for 44 states (excluding oil and gas producing states that are economic outliers) shows that lower levels of regressivity are associated with above average rates of personal income and GDP growth over the last five years. In short, the preliminary indication is that reduced regressivity is correlated with higher—not lower—levels of economic growth [Jeff Van Wychen,”Minnesota’s Progress Against Regressivity,” Growth & Justice, April 2015, p. 4].
Make taxes fairer, and your economy will be fine. That’s encouraging!