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Tax chairman says state taxes do rank favorably

I believe a few points of clarification are needed in response to a recent letter bemoaning Minnesota's place on a business advocacy group's tax rankings.

The letter was based on the findings of the Small Business & Entrepreneurship Council, which recently ranked Minnesota as one of the most expensive places to run a business. The group's methodology, however, is extremely flawed. The SBEC rankings look only at things like a state's "top corporate income tax rate," which ignores the many other factors that determine a business' tax liability.

For example: Minnesota's top corporate income tax rate of 9.8 percent is one of the highest in the nation, however the deductions and credits available to businesses lower that burden by as much as 70 percent. When we actually look at what percentage of a business' income is paid into state taxes -- as the Council on State Taxation recently did --- we see Minnesota's business taxes are actually the 15th lowest in the nation.

But tax rates don't tell the whole story. When we look at the total cost of doing business (taxes, wages, utilities, permitting, etc.), Minnesota business costs are actually lower than the national average, according to Moody's Minnesota fares even better in business climate rankings that also take into account our educated workforce, infrastructure, and other important factors. CNBC ranked Minnesota sixth in their Top States for Doing Business rankings, ahead of all our neighbors except Iowa (fouth).

As chairman of the Senate Taxes Committee, I have been witness to hours of discussion about the state's tax rates and how we compare to other states. While we're always looking for ways to make our state more competitive, we should also recognize that Minnesota continues to be a good place to live, work, and grow a business. Maybe that's why Minnesota has 21 Fortune 500 companies, while the Dakotas, combined, have one.

Tom Bakk


Minnesota Senate