New MCFE Study Compares Individual Income Tax Burdens by State

Accompanying MCFE Issue Brief Focuses on Minnesota Findings and the Impact of the New Fourth Income Tax Tier

The Minnesota Center For Fiscal Excellence today released its 2015 edition of Comparison of Individual Income Tax Burdens By State. The new release is the seventh edition of this report from the Center and captures for the first time the effects of the fourth income tax tier Minnesota lawmakers enacted in 2013.

The study calculates, compares, and ranks state and local individual income tax burdens for similar households with similar incomes across the country by modeling tax returns for 38 "taxpayer profiles" – unique combinations of income levels and filing types.  By calculating effective tax rates – that is, the actual tax payment as a percentage of filer income – the study also identifies the most and least progressive state income tax systems as measured by the tax rate differential paid between the same filers at different income levels.

To accompany the report, the MCFE has also released an Issue Brief examining the Minnesota-specific income tax findings in more detail (summary findings are available here).  

Besides reporting on Minnesota's tax burden and structural progressivity rankings, the Issue Brief examines the role and contribution the state's earned income tax credit (Working Family Credit) in the rankings and the influence federal income taxation has on filer burdens, effective income tax rates, and progressivity.  We conclude with some analysis and commentary the implications these findings have on four issues of ongoing policy interest to Minnesota:

  • the status of the state's earned income tax credit;
  • taxing senior income;
  • state competitiveness; and
  • future interest in and pursuit of, efforts to address income inequality