As a former Minnesotan I can say that it goes beyond taxes. The culture in Minnesota is very risk averse and if you're starting a software company finding able software developers is very difficult. Because of that culture, finding funding is very difficult as well which pretty much confines the field of potential startups mostly to ones that can be bootstrapped.
It's a shame because there is a pretty vibrant tech community in the Twin Cities. But it leans very heavily to contracting and consulting. I'd suggest going elsewhere to start a company and moving to Minnesota when you're ready to raise a family.
It's true. Telling friends and family what we do usually ends in an awkward stare. It consistently blows me away that people would rather work for 3M or the government than build something awesome that they love.
This is exactly my experience in the Twin Cities as well. Having recently moved to Boulder for spousal career support, I can't even really describe how different the mindset is here. It's not even close to the same.
It's a shame because there is a pretty vibrant tech community in the Twin Cities. But it leans very heavily to contracting and consulting. I'd suggest going elsewhere to start a company and moving to Minnesota when you're ready to raise a family.