Capitol Roundup: Tax bill goes to Walz; gas tax increase and delivery fee to fund roads
![State representatives sit in their chairs in the state House chamber](https://img.apmcdn.org/0d9427ca0abcd1e8023438a66c40e42760159c06/normal/9401bd-20230424-houseweeddebate-03-600.jpg)
Go Deeper.
Create an account or log in to save stories.
Like this?
Thanks for liking this story! We have added it to a list of your favorite stories.
Updated: May 21, 7:05 p.m. | Posted: May 20, 4:37 p.m.
The Minnesota House voted 69-63 along party lines Saturday night to pass a $3 billion tax plan that includes rebates, credits for families, property tax relief and new tax increases for those who profit from some investment earnings and for some corporations.
The Senate passed the bill Sunday afternoon by a 34-33 party-line vote and sent the bill to Gov. Tim Walz.
Democrats said the bill would make Minnesota a leader in its support for children and families. Meanwhile, Republicans said the state should send more money back to taxpayers and skip any new tax hikes.
With a $17.5 billion budget surplus at their disposal, lawmakers for months have sparred over how to use the money and the size of rebates that taxpayers should receive. Both DFL-led chambers are expected to pass the plan but not without lengthy debate.
Support Local News
When breaking news happens, MPR News provides the context you need. Help us meet the significant demands of these newsgathering efforts.
“We were really focused on who it is that needs help the most in this moment,” House Tax Committee Chair Aisha Gomez, DFL-Minneapolis, said. “And so that's what you'll see reflected in these pages, is our commitment to improving the lives of people in Minnesota, and especially, you know, aligning with the vision that was set out at his inauguration by our governor, that we want the state of Minnesota to be the best place in the country to raise kids and have a family.”
![Two people stand near a microphone](https://img.apmcdn.org/a418caa610b3c8403c86598f464655b41db1e901/uncropped/e25ea6-20230417-two-people-stand-near-a-microphone-600.jpg)
Included in the bill is a plan to issue child tax credits and working family tax credits to families with dependents. The credits would be determined based on a person’s income and number of children or dependents. Joint filers that make $35,000 or less would get the maximum credit of $1,750 per child. Families that make more than that could see smaller credits depending on their income and how many kids they have.
Tax experts estimate that 265,000 Minnesotans could receive the child tax credits and the relief could reduce child poverty in the state by a third.
The tax bill would also send tax rebates of $260 to those who made up to $75,000 in 2021 or $520 for a married couple that made up to $150,000. Those with children could also get rebates for up to three of them. A family of five could get a $1,300 tax rebate overall.
And more Minnesotans on Social Security would see their benefits exempt from state income taxes. The bill would raise the annual income cap for the exemption to $100,000 for a single filer or $140,000 for a couple. The proposal also allows for an income subtraction for people who receive public pensions. Those who make less than $100,000 a year could subtract as much as $25,000. Democrats say three quarters of Minnesotans on Social Security would not pay state taxes on it under the plan.
“It's not just it's not just parents and children who are in our neighborhoods, it's retired people, and people living on Social Security and also the pension incomes,” Senate Tax Committee Chair Ann Rest, DFL-New Hope, said. “Families are all different and they're all in our neighborhoods. And they will know that we, throughout this session, paid attention to them.”
![Person speaks at table02](https://img.apmcdn.org/49d03b82127875a0c046515039c5cc9d8b9da2df/uncropped/aa5e7e-20230426-person-speaks-at-table02-600.jpg)
Republicans for months have pressed Democrats to send more money back to taxpayers and to avoid tax hikes altogether. And House Minority Leader Lisa Demuth, R-Cold Spring, said the Legislature should reduce taxes.
“I think Minnesotans were looking for some of that money to come back,” Demuth said. “They were looking for less taxing. We shouldn't be carrying a surplus every year going forward. We need to adjust how government is spending money so Minnesotans during this time of inflation can keep making more of their money to pay for what they need.”
And while many agreed with the proposed child tax credit, they said the extra funding wouldn’t be enough to counter other tax increases and fees being proposed to fund housing, transportation and other state programs.
“I can agree with the child tax credit idea, but we have made it so expensive for Minnesotans after this session, that they're going to absolutely need that,” Senate Minority Leader Mark Johnson, R-East Grand Forks, said. “And now we're running on what the government is prioritizing, not what families are prioritizing.”
Lawmakers approved a $1 billion housing plan earlier this spring that would impose a 0.25 percent sales tax increase in the metro area to fund housing projects. And a transportation budget bill set to come up for a vote on Sunday is expected to include a higher gas tax and fee increases to fund road and bridge repairs.
Fight over E-pull tab provision
The plan would also set new restrictions for electronic pull tabs that were first allowed more than a decade ago to fund construction of U.S. Bank Stadium.
DFLers said current programs too closely resemble slot machines, which is a violation of state statute. They proposed barring features on the games that let users open multiple tabs with one touch, automatically trigger bonus games and win free plays.
“We need to enforce the law. I'm a prosecutor. That's a core value to me that we are a nation of laws, and we should follow the law,” Rep. Zack Stephenson, DFL-Coon Rapids, said. “We made a deal in 2012 and I understand it's uncomfortable for us to keep our deal, keep our word. But what good is our word as the people of the state of Minnesota if we don't keep it? Who should rely on it?”
![Rory Johnson at the Phat Pheasant](https://img.apmcdn.org/b9522a3f9cec014dc77a4c13ddd888ece83e16cb/uncropped/d80a19-20141124-phat-pheasant.jpg)
Republicans said the proposal went too far and could limit money that flows to charities and nonprofit organizations from the games. In effect, they said the change would shift the games back to versions that were available a decade ago.
“We're not eliminating pull tabs. We're just making them really boring like they used to be,” Rep. Greg Davids, R-Preston, said. “The provisions in this conference report are so onerous, so unfair to the charities that we will have charities going under, they will have to stop operations, because they can't make any money.”
Gas tax, delivery fee in transportation bill
A transportation conference committee on Saturday night outlined provisions of a $1.3 billion budget bill.
The plan would raise the tax on gasoline by indexing it to inflation and add a new 50-cent fee on deliveries more than $100, with an exemption for food. It would also raise the sales tax in the metro area by 0.75 percent, mostly to fund transit.
The gas tax indexing would amount to an effective increase of 5 cents per gallon by fiscal year 2027, committee staff said. It would raise $155 million in the next biennium and $266 million in the next.
DFL Transportation Committee Chairs Scott Dibble and Frank Hornstein said the new funds would go toward repairing roads and bridges and building out transit options in the state.
Hornstein called it a “historic and transformational” bill that covers all modes of transportation across the state.
The plan would also remove the minimum markup on gasoline in Minnesota. Consumers currently pay an estimated eight cents per gallon due to the markup. That markup is designed to prevent retail chains from undercutting independent retailers on price, but there is conflicting evidence of its effectiveness. As gas prices spiked last year there were bipartisan calls to eliminate it.
Republicans have opposed the delivery fee, which came down from an original 75-cent proposal in the bill passed by the House. Republicans said the gas tax increase, the delivery fee, the 0.75 percent metro area sales tax increase and a proposed hike in the motor vehicle sales tax would hit Minnesotans hard.
“Tying the gas tax to the Highway Construction Inflation Index is highly regressive and will hurt Minnesota families and seniors,” Rep. Kristin Robbins, R-Maple Grove, said on Twitter. “The DFL Trifecta is growing state government by 40 percent and expects Minnesotans to foot the bill.”
The House passed the bill by a party-line vote of 69-61 Sunday afternoon and sent it to the Senate which passed it 34-32. No Republicans voted for the bill.
Bonding, nursing home funding deal
Lawmakers on Sunday are also expected to release a $2.6 billion capital investment package, that will include general obligation bonds and cash.
Legislative leaders on Saturday announced that they’d reached a deal to send $300 million to nursing homes in crisis over the next four years in exchange for Republican support for a bonding package.
Under the agreement, more projects in Republican districts would be included than Democrats had proposed in a cash-only bill. Three-fifths of lawmakers in each chamber need to agree to let the state sell bonds – or take on debt.
Up until now Republicans in the Senate have been unwilling to agree to that without more tax cuts. And DFLers said in response they’d move forward with a $1.3 billion cash-only bill that focused more on projects in DFL-led districts. Democrats wouldn’t need Republican votes to pass that proposal.
The deal also includes a pledge to bring the legislative session to an orderly finish by Monday night. But DFL leaders raised the possibility of a one-day special session if the bill can’t be physically printed in time to meet Monday night’s deadline to adjourn.
“We'll cross that bridge when we come to it, but I imagine everybody would be fine,” House Speaker Melissa Hortman said, adding that it would happen only if the staff in the revisor’s office is overwhelmed. “If we're really at the precipice, and we just can't make it due to the workload.”