Study: Fiscal Cliff Could Lift Minnesotans’ Taxes by Thousands
If Congressional leaders are unable to find a solution before arriving at the so-called “fiscal cliff,” Minnesotans are expected to face an increase in taxes—although taxpayers in the state are likely to experience a smaller impact than those from some other states.
That’s according to data recently released by the Tax Foundation, a Washington, D.C.-based organization that bills itself as a non-partisan tax research group. The group used information from the U.S. Census Bureau and the Internal Revenue Service to estimate how families in each state would be affected by the fiscal cliff—which refers to a group of automatic spending cuts and tax-break expirations at the federal level that are scheduled to occur at the beginning of next year.
A Minnesota household earning $87,319 (the state’s median household income for a four-person family in 2011) would pay an estimated $4,382 more in taxes in 2013 than they did in 2011, the study found. That represents a 5.02 percent increase in taxes as a percent of income—and ranks the state 24th with respect to the impact of the fiscal cliff. (The Tax Foundation said that it compared 2011 and 2013 taxes because it is the latest year in which a federal “Alternative Minimum Tax” patch, which raises the exemption level for a type of income tax, was in effect, and is therefore a better comparison.)
New Jersey is expected to see the biggest change if the nation’s leaders are unable to avert the fiscal cliff; a family earning $101,682 is expected to pay $6,933 more in 2013, a 6.82 percent increase in taxes as a portion of income.
Maryland, Connecticut, Massachusetts, and New Hampshire rounded out the top five states based on the expected impact of expiring tax cuts and other changes triggered by the fiscal cliff.
Washington would be the least affected of all states; a family earning $81,582 would pay $3,362 more in 2013 taxes, representing a 4.32 percent increase in taxes as a portion of income, according to the Tax Foundation.
To view the complete study, click here.
To learn more about the fiscal cliff and its anticipated impact, read the Tax Foundation’s “The Fiscal Cliff: A Primer.”
Minnesota business leaders have cited the looming fiscal cliff as an important factor that could significantly affect their businesses. Respondents to Twin Cities Business' Quarterly Economic Indicator Survey said that they are in a holding pattern, waiting for solutions to the budget-policy standoff in Washington.
State officials—who recently reported that Minnesota lost 8,100 jobs in October, while the unemployment rate held steady at 5.8 percent—also said that employers are keeping a close eye on Congress as the deadline approaches.