Walz unveils plan for Minnesota taxes — here's who will get a break

CATHY WURZER: Governor Tim Walz has unveiled a bonding bill today. It's a $3.3 billion public works construction package. Earlier this week, he released the final part of his budget. It includes taxes and tax breaks. So who may pay more and who could get a break?

For more on that, we'll ask Rochelle Olson. She's a Politics and Government Reporter with the Star Tribune. Hey, Rochelle. How are you?

ROCHELLE OLSON: I'm good, thanks.

CATHY WURZER: Thanks for being here. So the governor's budget is 62-- excuse me, $65.2 billion. A lot of that is spent on existing programs and a lot of new spending. There's that hefty $17.5 billion projected budget surplus that he's tapping into. But as your story in the strip indicates, he's also got some higher fees and new taxes tucked into the plan. What stands out to you on the revenue side of this budget?

ROCHELLE OLSON: Well, it's really just a mix of a lot of things. I don't know that any one in particular stands out. But I mean, there's a new capital gains tax that's going to raise $661 million over the next two years. And that'll hit people-- hits you at $500,000. And then it goes even higher at $1 million.

The metro-wide sales tax for the Seven County Metro area for transportation, public transit system, that's a 1/8 of a cent sales tax that he wants to add in the Seven County Twin Cities metro area. So that'll hit everyone. Car tab fees-- he's increasing the amount you pay the first year you register the car-- most significantly the first year.

So anybody buying a new car in 2024 is going to feel that. And then they're going to stretch out-- it's going to be a little bit more in subsequent years for renewing your car tabs. DNR fees are going up for fishing licenses, and boat registrations, and the annual state parks pass. That will raise about $20 million a year. And then he's also got coming in 2026 a payroll tax to fund the family medical leave program that DFLers are quite hot on. And if they legalize marijuana, he's also proposing a 15% tax on cannabis products, which is higher than the 8% proposed by DFLers. So it's a real mix. I don't know that anything particularly jumps out, but it just seems like everybody's going to feel it some way or another.

CATHY WURZER: Which I think some listeners, and maybe his Republican colleagues in the legislature, would say, well, with a huge budget surplus, why raise various fees and taxes? What's the response from the governor?

ROCHELLE OLSON: Yeah, that's what the Republicans are saying. I mean, Lisa Demuth, the House Minority Leader, said straight away-- said if we can't cut taxes now, when can we? And he's also increasing state spending by about 25% over the biennium.

So this is also just the starting point, because certainly even the DFL controls both chambers. They have different ideas in some ways about where the money should be spent. But the governor's response, I think, for him, this is about getting money back to people who need it-- people with children, the child tax credit, the child care credit to help pay for the cost of daycare.

He has a Social Security tax cut, which doesn't go as far as even some of the DFLers in the legislature were hoping. So he would say he's getting money back to the people who need it and what's going to help the state. He's got an angel tax credit in there, which is designed to get people to invest in startup businesses-- early stage.

And he's got a historic rehabilitation tax credit. And so he would say he's investing in things that are important to him and the DFL.

CATHY WURZER: I think he's got, what, $8 billion in tax cuts in this plan. I see he's also going back to the Walz Checks plan that he had prior, during the last session, which didn't really go anywhere with his DFL colleagues. What are the particulars of that proposal?

ROCHELLE OLSON: Well, anybody who earns more than $75,000 as a single filer-- so if you earn $75,001-- you won't get anything. But if you earn $75,000 or less, you'll get $1,000. Couples earning $150,000 or less can get $2,000 under the plan. And families with kids can get $200 per dependent up to three dependents.

And the income numbers I'm talking about are the federally adjusted gross income levels. So if you make over that, you're not going to see anything. Otherwise, you can get up to $2,600 for a family with multiple dependents or a single person, $1,000. But you have to be underneath those thresholds of $75,000 and $150,000.

CATHY WURZER: So when you look at the budget here, Rochelle, what do lawmakers say? Are there tails in this budget in terms of programs that are going to go out into the out years of the budget that are going to be left hanging? It all balances out?

ROCHELLE OLSON: Well, I think the governor would say it balances out. Some would say, yes, there are tails. The Social Security one is probably going to be one of the bigger points of contention with probably the Democrats and the Republicans, pushing for more relief for Social Security recipients. And that's a huge cost. But I think the governor would say it's covered.

And others would say maybe not. We're going to be talking about this for weeks and months.

CATHY WURZER: And thanks for bringing that up, because, of course, this is just the first the opening salvo in what could be an interesting negotiation, I guess, with the DFL-controlled Senate and House. Do we think we may see more disagreements or delays between all parties?

ROCHELLE OLSON: Well, look, we were told a couple of weeks ago the era of gridlock is over. So I think that was the governor who said that early on. I don't know about delays, but as you know, there is a deadline to finish the work. But as anyone who faces a deadline knows, you generally work right up until the deadline. So I think they're going to be talking about it.

But there is a sense, I think, that people want to get something done. That's certainly what they say is that the legislators repeatedly are telling us that they believe voters want them to get something done. So I think it would behoove them to do so, would be my guess.

CATHY WURZER: All right. Of course, it all remains to be seen. You never know what's going to happen up there. Rochelle, thank you so much for your time. I appreciate it.

ROCHELLE OLSON: You bet.

CATHY WURZER: Rochelle Olson is a Politics and Government Reporter for the Star Tribune. She and her colleagues published a piece explaining the tax proposals and Governor Walz's budget. You can read that on the Star Tribune's website and you can check out our own Brian Bakst's overview of the whole budget proposal. That is at mprnews.org.