Gov. Tim Walz trumpeted the ‘biggest tax cuts in state history’ in his two-year budget, but amid sweeping benefits for families and seniors there are also fees higher and new taxes.
In his public presentation Tuesday at the Department of Revenue with all of his commissioners by his side, Walz pointed to his proposal for refund checks, Social Security tax cuts and expanded credits for families raising children and facing child care costs. He said his $8 billion in tax cuts would ease pressures on Minnesotans’ budgets.
“If you have kids in school, if you have daycare, if you’re a worker and you make less than $150,000, you’re going to see direct impacts,” Walz said Wednesday at a graduation ceremony. bill signing.
At the same time, the DFL Governor is proposing new taxes and increased fees that would fall on Minnesotans who earn paychecks, shop in the seven-county Twin Cities metropolitan area, buy fishing licenses, own passenger vehicles and those who sell assets of higher value. over $500,000. He also proposed a cannabis tax if the legislature legalizes marijuana.
Some of these tax and fee hikes would generate at least $1.1 billion combined over the next two years. This amount does not include the proposed increase in payroll taxes which would take effect in the next budget and would generate approximately $1 billion per year.
Citing the projected budget surplus of $17.5 billion, Republicans rejected the proposed hikes. Senate Minority Leader Mark Johnson, R-East Grand Forks, said Wednesday he had heard from voters “disheartened” by Walz’s proposal. “Minnesota residents are very upset to see these little tokens coming back and the government is up 22-25%,” Johnson said.
The governor’s $65.2 billion budget proposal is the starting point for legislative deliberations in the months to come. Changes big and small are likely because even though Democrats control the House and Senate, they don’t agree on everything in the Walz plan.
Here is a breakdown of the Governor’s proposed tax and fee increases and recommended tax cuts:
Taxes and fees
Metro sales tax: Walz proposed a new one-eighth-of-a-cent sales tax in the seven-county metropolitan area to increase funding for the region’s transit system. Money from the Metropolitan Council could be used to operate existing transit lines and build new ones, including the $2.7 billion Southwest Light Rail Line connecting downtown Minneapolis to Eden Prairie. The council must find up to $260 million to complete the controversial South West project, an extension of the current Green Line. So far, the state has only contributed $30 million to Southwest’s bottom line, with Hennepin County and the federal government making up most of the rest. The new tax would take effect in October, raising $60 million in fiscal year 2024 and $93 million in 2025.
Payroll tax: Lawmakers Walz and DFL want Minnesota to create a paid family and medical leave program, allowing workers time off to care for a loved one or themselves. The governor would use excess cash to start the program and a payroll tax to support it. Walz aims to impose a 0.6% premium on wages starting July 1, 2026. Employee contributions would cover half the rate, employers would cover the other half. The state estimates the bounty would generate about $1.2 billion in 2027.
Capital gains: Minnesota does not have a separate capital gains tax like the federal government does for assets held longer than one year, but Walz offers one. When a taxpayer sells an asset such as a house, stock, or business, the difference between the selling price and the value of the asset is either a capital gain or loss. Walz proposed a new Minnesota tax of 1.5% on gains and dividends between $500,000 and $1 million. He proposed a new 4% tax on gains over $1 million for individuals, trusts and estates. The tax would raise $661 million over the next two years.
Car Tab Fee: Minnesota law imposes a tax of $10 plus 1.285% of the base value of passenger vehicles, adjusted by a percentage based on the age of the vehicle. It is 100% the first year and decreases by 10 percentage points each year until it reaches 10%. The flat rate tax for vehicles over 10 years old and the minimum tax for all vehicles is $35. Effective January 1, 2024, Walz has offered to increase the first year of registration to 160% of the car’s manufacturer’s suggested retail price. The following year, Walz proposed a 100% tax, lowering 10 percentage points each year to 20%. The minimum tax would increase to $30. This increase would yield an additional $286 million in the next biennium.
DNR fees: Minnesotans would see fee increases when traveling to state parks or buying fishing licenses and boat registrations under Walz’s budget. An annual state park pass would increase from $35 to $45. Daily admission would increase from $7 to $10. Together, these increases would bring in about $20 million a year.
Marijuana: Governor’s budget includes legalizing marijuana and creating a new state office to oversee its regulation. If lawmakers legalize marijuana for adults this session, Walz wants to impose a 15% tax on recreational cannabis products. This is higher than the 8% tax proposed by the DFL in the Legislative Assembly.
Cheques: Individuals with a federally adjusted gross income of $75,000 or less would receive $1,000 and couples earning $150,000 or less would receive $2,000 under Walz’s plan. Families would receive $200 for each dependent, up to three children. More than 2.5 million households could see the payments, but lawmakers have been lukewarm about the idea.
Reduction of social charges: Under the governor’s plan, the state would increase the number of Minnesota households with tax exemptions from Social Security benefits, but not eliminate the tax altogether, as some Democrats in the House are proposing. Legislative Assembly. The Walz administration estimates the change would reduce an average of $278 in taxes for 377,000 households that receive Social Security benefits.
Child tax credit: Low-income families with children would receive $1,000 per child, up to $3,000. Some families with adults with special needs may also qualify. How much a family gets incrementally if a married couple earns more than $50,000 or a single parent earns $33,300.
Child care credit: More Minnesotans would qualify for help with child care costs under this credit expansion. It raises the income threshold at which the credit begins to disappear from the current level of $55,300 to $200,000 for a married couple. Walz’s administration estimated that the changes would increase the amount families save through credit, on average, by $500 to $1,500.
Angel tax credit: Walz recommended $10 million for angel tax credits each year for the next four fiscal years beginning July 1. Credit would go to investors and funds that invest capital in technology-focused start-ups and new proprietary products, processes or services in specified areas. . Launched in 2010, the program has been funded at various levels ranging from zero to $15 million per year.
State Historic Rehabilitation Tax Credit: The governor’s budget proposal would revive a state tax credit to rehabilitate historic buildings that expired in June. The 20% tax credit could be used to rehabilitate a structure listed on the National Register of Historic Places or contributing to a registered historic district.
Writer Janet Moore contributed to this report.