Personal income fell in Minnesota and most of the nation in the first quarter of 2013 compared with the previous three months, thanks in large part to tax changes that took effect at the start of the year.
Total personal income in Minnesota fell at an annualized rate of 1.4 percent in the first quarter, a drop of $3.5 billion, according to figures released Friday by the U.S. Department of Commerce. Nationally, income fell 1.2 percent, a decline of $171 billion.
The decline amid otherwise cheery economic news can be explained mostly by the expiration of a two-year federal payroll tax holiday, and an end-of-2012 rush to report income before a tax hike hit high earners at the beginning of 2013. The figures reflect all income, including paychecks, property rent and investments.
Minnesota's decline was most evident in dividends, interest and rent, which fell 4 percent. Among industries in Minnesota, finance fared worst, reflecting the national trend.
"People did respond to higher taxes on upper-income individuals," said Tom Stinson, an extension economist at the University of Minnesota. "There obviously has been some income shifted into 2012 from 2013."
While Minnesota's personal income fell faster than the national average in the first three months of the year, income in the state rose 2.9 percent from the first quarter of 2012, or about $7.1 billion. That's slightly faster than the national average.
Personal income fell in 49 states, including North Dakota, where it fell 2.3 percent, or $873 million. Wyoming, North Dakota, Arkansas, California and Delaware saw income fall the most.
The states that fared the best were South Dakota, Iowa, the District of Columbia and Kentucky. South Dakota was the only state where income rose in the first quarter, by 1.6 percent, or $610 million.
