Following a year in which racial unrest and a global pandemic put unprecedented strains on citizens and economies, states across the country are working to craft fiscal plans capable of adapting to shifting realities.
In riot-ravaged Minnesota, Gov. Tim Walz of the Democrat-Farmer-Labor Party initially proposed a two-year budget plan that included a series of unpopular tax hikes, but ultimately dropped several of those increases amid pressure from Republican lawmakers, according to the Washington Examiner.
Walz had originally put forth a $52.4 billion budget that represented the largest such plan in the state’s history and which would have boosted spending over the prior budget by $4 billion.
However, in light of a newly-projected – and unanticipated – budget surplus of $1.6 billion and the addition of $2.6 billion in federal relief funds, the governor bowed to pressure from the GOP to submit a revised budget and pull back on some, but not all, of his desired tax increases.
According to the Star-Tribune, Walz eliminated roughly $1 billion in tax increases targeting large estates, corporations, and cigarette sales, though he continues to push for a new income tax on Minnesota’s highest earners.
Having already made the aforementioned concessions, Walz must still negotiate with a state legislature that is divided and in which the Republican-controlled Senate has already promised that no tax increases would occur this year. The GOP’s budget goals include zero tax increases, a 5% decrease in administrative expenditures in the government, and $591 million in additional tax cuts, as the Star-Tribune noted.
Though Walz has clearly begun moving toward the center from his initial plan, Minnesota Senate Majority Leader Paul Gazelka (R) remained dissatisfied, saying:
He still wants to raise taxes. Can you believe that? When you think about all of the billions of billions of dollars coming in from the federal government, and our $1.6 billion surplus, he still wants to raise taxes.
We’ve got to work together with the governor, but it’s not to raise taxes, it’s to pass a balaned budget that works for Minnesota.
One area of potential consensus between the rival factions is that of tax relief for those who have received unemployment benefits during the pandemic and for businesses that obtained Paycheck Protection Program loans that are not federally taxable, but would be taxed at the state level unless actions is taken this year, according to Minnesota Public Radio. However, the appropriate amount of relief remains a subject of disagreement, with House Minority Leader Kurt Daudt (R) opining:
Taking money for struggling businesses is indefensible when state government is flush with cash. 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.
Though it is clear that Republicans in Minnesota have succeeded in nudging Walz in the right budgetary direction, time will tell whether the final product of negotiations is something that will substantively ease the burden on taxpayers and ensure that federal relief funds are used as intended.