Tax Incidence Study released, top 10% still paying less

The Minnesota Department of Revenue released their bi-annual Tax Incidence Study today.  The study looks at the effective state and local tax rates paid by Minnesota taxpayers.  The current study looks at tax year 2008.  As has been the recent pattern, the Tax Incidence Study again shows that the top 10% of income earners in the state pay significantly less of their income in state and local taxes than any other decile.  The top 10% pay an average of 10.3% of their incomes in state and local taxes versus the state average of 11.5%.  The poorest 10% of Minnesotans pay a whopping 32.5% of their incomes in state and local taxes. (UPDATE:  The 32.5% figure for the lowest 10% is somewhat misleading because the state acknowledges there are some sources of income for this group it isn’t capturing.)

Incidence Trends

It’s also interesting to look and see how the tax incidence rates have changed over time.

As you can see from the chart, there has been a substantial change.  In 1990, all the deciles (except for the bottom 10%) were right around the state average of 11.8%.  The Ventura tax cuts of the late 1990s had a significant impact on taxes for the wealthiest Minnesotans , a trend that has continued through this past decade and is slated to continue should no changes in the tax law be made.



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