Minnesota Gov. Walz releases revised budget plan with fewer tax increases

MINNEAPOLIS (AP) — Gov. Tim Walz on Thursday released a revised two-year budget proposal that removes nearly $1 billion in proposed tax increases from his initial plan while expanding tax relief measures following an improved economic outlook for the state.

The revised proposal reduces new taxes from more than $1.6 billion to about $670 million, while increasing tax relief in the initial plan to nearly $1 billion for families, renters, businesses and unemployed workers. The new plan also eliminates proposed cigarette and estate taxes from the earlier proposal, and reduces the state’s corporate franchise tax rate from 11.25% to 10.8%.

“Minnesotans have met the challenges of COVID-19 pandemic as they always do when faced with hardship — with grit and resiliency,” Walz said in the release. “But we know that our students, working families, and small businesses have borne the brunt of this pandemic.”

The adjusted plan comes after an announcement last month from the state’s management and budget agency that swung the state’s projected economic forecast from an almost $1.3 billion deficit to a nearly $1.6 billion surplus in the next two-year budget. The proposal does not account for about $2.6 billion in aid for the state government from the $1.9 trillion federal stimulus package President Joe Biden signed last week.

The revised proposal also outlines a tax exemption for businesses that received up to $350,000 in federal Paycheck Protection Program loans, which state officials say would include 90% of Minnesota businesses that received a loan. Workers who received unemployment benefits would see tax relief on up to $10,200 of benefits they received, which would amount to an average savings of $486 for more than 500,000 households, according to the governor’s office.

The proposal keeps proposed income tax increases on the state’s wealthiest earners, differing from the budget proposal released by Senate Republicans earlier this week that features no new tax increases. The GOP-controlled Senate, which passed a proposal last week that eliminates taxes on all federal PPP loans and some unemployment benefits, pledged not to raise taxes to balance the state’s budget.

GOP House Minority Leader Kurt Daudt, of Crown, said in a statement Thursday that all businesses that received the federal PPP loans should see relief on taxes, citing the state’s projected surplus and incoming federal aid.

“Taking money from struggling businesses is indefensible when state government is flush with cash,” Daudt said. “We have billions of dollars available to fully protect workers and businesses from unnecessary tax hikes, and ensure that government is not profiting off relief dollars intended to help Minnesotans.”

House Democrats are expected to announce their proposal next week. State leaders will continue negotiations as they aim to agree on a two-year budget by the end of the legislative session in mid-May.

Mohamed Ibrahim is a corps member for the Associated Press/Report for America Statehouse News Initiative. Report for America is a nonprofit national service program that places journalists in local newsrooms to report on undercovered issues.