The Taxman Cometh and Its Implications
The 2013 Minnesota Legislative session was not kind to those with higher incomes. Much attention was focused upon an income tax increase for higher income taxpayers. However, besides the income tax increase, a new state-level gift tax, coupled with changes in the Minnesota estate tax, have prompted many taxpayers to question whether it makes financial sense for them to remain Minnesota residents.
My Lommen Abdo colleagues and I have been reading and writing feverishly since the changes became law. My take on Minnesota’s new gift tax can be found here; my colleagues Karen Schlotthauer and Glenn Kessel offer their thoughts in an article that can be found on the Lommen Abdo website.
As to the changes in Minnesota’s estate tax, particularly the expansion of the tax as it pertains to non-residents owning interests in pass-through entities sitused in Minnesota, I gave my two cents on that topic here.
Our latest piece focuses on the inevitable question many high income taxpayers are asking these days; namely, should they stay in Minnesota or leave the state for a more tax-friendly environment (be it Texas, Florida or even our neighbor to the east, Wisconsin)? You can read it here.
So what’s the punchline in all of this? Simply, that at a time when many states are lightening their tax burden (lowering income taxes, reducing or eliminating state-level estate taxes, etc.), Minnesota went the opposite direction. Further, the recent Minnesota Tax Court has essentially said that to change your residency from Minnesota to another state, a taxpayer has to pull up stakes in Minnesota. The combination of these factors could have profound and adverse effects for charitable giving, business investment, and a wide variety of other concerns.
Governor Dayton has already called for a special session to repeal one particular tax regarding farm equipment; he ought to expand that call to include a repeal of most, if not, all of the taxes outlined in the articles discussed above.