On March 18, Minnesota manufacturers and farmers met with U.S. Representative Erik Paulsen in order to voice their displeasure with Minnesota’s policy on an inheritance tax, more commonly known as the “death tax”. Many complained that this excessive taxation was hurting their ability to conduct and manage businesses within Minnesota.

The way in which the inheritance tax works is that any “gross estate”, or in friendlier terms, any form of inheritance that is over $1,200,000, is taxed. This may seem high if one looks at it through a salary or simply liquid assets, but many small businesses are worth more than this amount. In fact, the average small business revenue is around $3.6 million. Indeed, the average rate is around 9 percent of the estate; however, the IRS 706 and Minnesota M706 tax forms may mean in certain instances it is higher than 9 percent. While those business owners in the top 2 percent of income are exempt from taxes under House File 63, it would appear that many others would not be.

With a high inheritance tax rate at 9 percent and many of the surrounding states having either eliminated or greatly reduced the tax rate, this could be quite damaging to the startup and retention of small businesses in Minnesota. Minneapolis is not the only Midwestern city with a trendy vibe anymore, with cities such as Milwaukee and Kansas City copying this strategy in creating a welcoming youthful environment. This is environment is conducive to the start of new small businesses, which many people would agree is the lifeblood of the American economy. The crushing tax burden faced by states like Minnesota and Illinois makes it difficult for the economy to grow in this post-recession world. For the first time in years, Minnesota has finally had a big surplus, and Minnesotans should demand a tax cut because of it.