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Minnesota Taxes in Comparison

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  1. Minnesota Taxes in Comparison

  2. ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY KPMG TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (I) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (II) PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.  Notwithstanding anything to the contrary set forth herein, you (and your employees, representatives, or other agents) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of any transaction, and all materials of any kind (including opinions or other tax analyses) that are provided to you by KPMG LLP related to such tax treatment and tax structure, effective immediately upon commencement of discussions with KPMG LLP. The information contained hereinis of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

  3. State –Local Tax Mix: Minnesota v. U.S. • Relatively less reliance on property tax • 29 percent vs. 33 percent • Relatively less reliance on general sales taxes • 19 percent vs. 23 percent • Relatively greater reliance on personal income taxes • 29 percent vs. 21 percent

  4. State-Local Tax Mix: Minnesota vs. Great Lake States • Relatively less reliance on property taxes • 30 percent vs. roughly 40 percent in Illinois, Michigan and Wisconsin; Minnesota has least reliance in the region • Relatively less reliance on general sales taxes • 19 percent vs. 25 percent in Indiana, Iowa, and Michigan; Wisconsin and Illinois about equal to Minnesota • Relatively greater reliance on personal income taxes • 29 percent vs. 17 percent in Illinois and Michigan; Minnesota is highest with Indiana, Iowa and Wisconsin at about 25 percent

  5. Minnesota vs. U.S. • State taxes only – Compared to the U.S. • Sales tax reliance – 26 percent vs. 31 percent • Personal income tax reliance 40 percent vs. 35 percent • Local taxes only – Compared to the U.S. • Property tax reliance – 93 percent vs. 74 percent • Sales tax reliance – 2 percent vs. 11 percent • State taxes only – Compared to the Great Lakes • Property taxes – 4 percent; only Michigan also has state property tax • General sales tax – 25 percent is lowest in the region; 40 percent in Indiana and Michigan • Personal income taxes – 41 percent (highest along with Wisconsin) • Local taxes – Compared to the Great Lakes • Minnesota is the highest; Illinois, Iowa and Wisconsin share sales

  6. Tax Burdens: 1977 – 2009 [Taxes as Percent of Personal Income] • State – Local Taxes • 1977 – 2002 – Minnesota generally exceeds U.S. average and other states in the region (except Wisconsin) by considerable margin • 2005 – 2009 – Minnesota runs steady at about 10.8 percent of personal income; effectively equal to U.S. average and near the middle of Great Lakes States • State Taxes Only • Minnesota at roughly 8.0 percent of personal income consistently above U.S. average (6.0 percent) and at highest among states in the region

  7. Structural Characteristics • Corporate Income Tax • Tax rate is relatively higher: 9.8 percent vs. 6.0 – 8.0 percent (roughly) • Personal Income Tax • Tax rate is generally higher 7.5+ percent (equivalent to Wisconsin), compared to flat rates in Indiana and Illinois. Phase-out of exemptions and deductions has substantial effect • General Sales Tax • Rate is near the upper end of the region • Base with food and clothing exempt is relatively more narrow • Tax relatively large number of services – most of which are classified as services • Likely tax manufacturing equipment and utilities a bit more as well as other business inputs

  8. State-Local Tax Mix: Minnesota and U.S.Percentage Distribution of State and Local Taxes -- 2009 Source: Bureau of the Census

  9. State – Local Tax Mix: Upper MidwestPercentage Distribution of State and Local Taxes in Selected States – 2009 Source: Bureau of the Census

  10. State Tax Mix: U.S. and MinnesotaPercentage Distribution of State Taxes -- 2009 Source: Bureau of the Census

  11. Local Tax Mix: U.S. and MinnesotaPercentage Distribution of Local Taxes – 2009 Minnesota Source: Bureau of the Census

  12. State Tax Mix: Upper MidwestPercentage Distribution of State Taxes in Selected States – 2009 Source: Bureau of the Census

  13. State-Local Tax Burden Over TimeState-Local Taxes as Percent of Personal Income – Various Years Source: Bureau of the Census

  14. State Tax Burden Over TimeStateTaxes as Percent of Personal Income – Various Years Source: Bureau of the Census

  15. Corporate Income Tax Features Source RIA Checkpoint

  16. Personal Income Tax Characteristics Source: RIA Checkpoint

  17. Sales Tax Characteristics