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Kiplinger’s: Minnesota has ‘very ordinary overall state and local tax burden’

(The Center Square) – A recently released report from Kiplinger’s says taxes for middle-class families in Minnesota are consistent with other states, but there’s significant room for improvement. 

According to the personal finance advice publisher’s 10 Least Tax-Friendly States for Middle-Class Families: “Minnesota’s income tax rates start at 5.35%, which isn’t necessarily a good sign for middle-class taxpayers. Nevertheless, the income tax burden in the North Star state for middle-income residents is decidedly average. The same can be said about the state’s sales tax burden. When you add in property taxes that are only slightly higher than average, you get a very ordinary overall state and local tax burden.”

Single filers pay 5.35% if they make less than $27,230 of taxable income, while joint filers pay that percentage if they make less than $39,810. Single filers who make more than $166,040 in taxable income pay 9.85%. That percentage applies to joint filers who make more than $276,200.

Minnesota’s state sales tax levy is 6.875%, and localities can add up to 2%, with an average combined rate of 7.47%, according to a Tax Foundation report cited by Kiplinger’s. Groceries, prescription drugs and clothing are exempt. Motor vehicles are exempt too, but they are taxable under a 6.5% excise tax ($10 for certain older vehicles; $150 for certain collector vehicles).

Excise and special sales taxes on cigarettes and little cigars rise from $3.673 per pack to $3.703 per pack beginning in 2022. Vapor products are taxed up to 95% of wholesale prices.

Beer, wine and liquor taxes are subject to a 2.5% gross-receipts tax and per gallon taxes, ranging from 15 cents per gallon for beer up to $5.03 per gallon for liquor.

For estate and inheritance taxes, Minnesota includes taxable gifts made within the preceding three years in its exemption of amounts below $3 million. Tax rates range from 13% to 16%.

The median property tax rate in the North Star State is $1,082 per $100,000 of assessed home value.

Motorists pay 30.6 cents in motor fuel taxes per gallon of gasoline or diesel, along with annual vehicle registration taxes based on their car’s sticker prices and age.

Kiplinger’s said Illinois was the least tax-friendly state for middle-class families. It said the Land of Lincoln assesses middle-income residents at or above the average income, sales and property taxes. Its 4.95% flat income tax rate is the ninth-highest in the country. Its average state and local sales tax in Illinois is 8.83%, the seventh-highest in the U.S.

“The tax situation really goes downhill fast for Illinois residents when you look at the property taxes they have to pay. Property taxes in Illinois are the second-highest in the nation,” the article said. “If our hypothetical family purchased a $300,000 home in the state, their average annual property tax bill would be an eye-popping $6,495.”

Minnesota also did better than the other “least tax-friendly” states: Iowa, Wisconsin, Michigan, Nebraska, Kansas, New York, Connecticut, Maryland and New Jersey.

On the other end of the spectrum lies one of Minnesota’s neighbors: North Dakota.

Compared with Minnesota, North Dakota has lower gas taxes per gallon (23 cents instead of 30.6 cents), median real property taxes ($986 in taxes per $100,000), state sales tax rates (5%, with an average combined state and local rate of 6.96%), and income tax range (1.1% to 2.9%).

Other “most tax-friendly” states for middle-class families are Washington, Nevada, California, Arizona, Alaska, Tennessee, Wyoming, Florida and Delaware.

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