Skip to content
2025 State Tax
Competitiveness Index

Minnesota | #44 Overall

Minnesota‘s tax system ranks 44th overall on the 2025 State Tax Competitiveness Index. Minnesota ranks relatively uncompetitively on the Index and is held back by its graduated state individual income tax with a top rate of 9.85 percent, among the highest in the country. Its taxpayers are also subject to alternative minimum taxes under both the individual and corporate income tax codes, adding complexity to the code. The state also recently created a new surtax on long-term capital gains income, such that the top marginal rate on long-term capital gains income is now higher than the top rate on ordinary income.

Minnesota also has high sales tax rates, with a 6.875 percent state sales tax rate and an average combined state and local sales tax rate of 8.12 percent. Minnesota’s effective property tax rate on owner-occupied housing value is on the high side, and its split roll system imposes higher taxes on businesses and renters. Minnesota also has a 9.8 percent corporate income tax rate, one of the highest in the country. The state only allows 15 years of net operating loss (NOL) carryforwards, less generous than most states’ rules, which either offer 20-year or unlimited carryforwards. Additionally, Minnesota’s 20 percent first-year expensing allowance is less generous than the federal bonus depreciation allowance under Section 168(k).

Minnesota recently implemented a tax on global intangible low-taxed income (GILTI), which now needs to be added as dividend income by corporations operating within the state. State GILTI taxes are highly uncompetitive, as they have nothing to do with a company’s activities in the state (or even in the US). Minnesota is also in the minority of states to still impose an estate tax on bequeathed property, imposing the tax with a top rate of 16 percent. Among the bright spots in Minnesota’s tax code are its conformity to Section 179 and the fact that the state only partially taxes tangible personal property.

CategoryRankScore
Overall444.48
Corporate Taxes434.42
Individual Income Taxes444.35
Sales Taxes344.38
Property Taxes265.10
Unemployment Insurance Taxes424.31

Top Overall States

  • #1 Wyoming
  • #2 South Dakota
  • #3 Alaska
  • #4 Florida
  • #5 Montana

Bottom Overall States

  • #50 New York
  • #49 New Jersey
  • #48 District of Columbia
  • #48 California
  • #47 Connecticut

Neighboring States

  • #2 South Dakota
  • #9 North Dakota
  • #19 Wisconsin
  • #20 Iowa

Compare Neighboring States

Tax Data by State

Get facts about taxes in your state and around the U.S.

Explore Data

More on Minnesota

2025 State Tax Competitiveness Index

2025 State Tax Competitiveness Index

The State Tax Competitiveness Index enables policymakers, taxpayers, and business leaders to gauge how their states’ tax systems compare. While there are many ways to show how much state governments collect in taxes, the Index evaluates how well states structure their tax systems and provides a road map for improvement.

115 min read
GILTI Tax Treatment by State, 2024 GILTI state tax rates

GILTI Tax Treatment by State, 2024

States that tax GILTI increase filing complexity, drive up the cost of tax compliance, and introduce unnecessary economic uncertainty and legal risk. 21 states and DC continue to tax GILTI despite these challenges.

6 min read
Taxpayers Shoulder a Heavy Burden for Sports Stadium Subsidies

Taxpayers Shoulder a Heavy Burden for Sports Stadium Subsidies

Sports stadium subsidies are salient political gimmicks designed to appear as if politicians are providing tangible benefits to taxpayers. The empirical evidence shows repeatedly that stadium subsidies fail to generate new tax revenue and new jobs or attract new businesses.

6 min read