The event was held one day before tax filings are due, and features only six bills heading towards the session finish line in May; costs may be higher as other bills are rolled out.
ST. PAUL – Today Senate Republicans highlighted nearly $10 billion in proposed tax hikes from Democrats, despite the $17.5 billion surplus. Using just six bills proposed by the House, Senate and/or Governor Walz, each bill has the support of one of the all-Democrat-controlled bodies of state government, giving it a good chance to stay alive as Republicans are shut out of the negotiations.
“The $9.69 billion in tax hikes we’ve tracked down is simply stunning. It is also incredibly brazen and tone-deaf as Minnesotans continue to struggle with $3 gas, inflation costs on their grocery basics, and tight labor market driving up the cost of everyday services,” SenateMinority Leader Mark Johnson (R- East Grand Forks) said. “The Democrat agenda will empty every Minnesotan’s pocketbook to support their out-of-control spending agenda. With tax filing day tomorrow, Minnesotans should know the Democrats’ budget will lead to higher taxes now, and even higher taxes in the future to support their explosive growth in state government.”
Held in the Senate Tax Committee room, the Senators warned that future senate tax hearings would certainly be an eye-opening experience for taxpayers. “Looking at the number of tax increase bills sitting around the Capitol likely to be included in the final bills, we can see Minnesotans are in for a rude awakening,” Senator Bill Weber (R-Luverne) said. “Every Minnesotan will be hit by these tax increases, whether they are shopping in the metro, buying a new car, or updating their tabs. If the current form of Paid Family and Medical Leave passes, they will be hit with taxes just for collecting a paycheck.”
The legislature must pass a balanced budget before session ends in May for Governor Tim Walz to sign. Much has been made of the state’s $17.5 billion surplus and projected spending to exceed $55 billion over the next two years.
“While this year’s tax hikes are bad, what’s really going to shock Minnesotans is what happens in the next budget when we don’t have a huge surplus to spend,” Senator Steve Drazkowski (R-Mazeppa) said. “The Democrats are pushing through bills that spend $19 billion of the surplus and setting our budget up for a fiscal cliff and huge shortfalls. Since we can’t count on Democrats to hold back on tax increases when there’s a surplus, katy bar the door when they’ve triggered enormous deficits.”
See: 2023 General Fund Spending by Budget Area
Cities and Counties are required to hold their own Truth in Taxation hearings before setting their budgets and preparing tax increases on their constituents. Next year’s hearings might be very surprising as local government and school boards have testified the mandates and polices being passed in St. Paul will have an impact on local budgets across the state.
“My local communities have been watching the movement of all the mandates across the Legislature and they are telling me they are growing increasingly nervous.” Senator Carla Nelson (R-Rochester) said. “The pile of unfunded mandates and regulations being contemplated will carry tremendous costs for our schools, cities and counties, and that means they will have no choice but to raise property taxes to meet their regulations. In addition to the nearly $10 billion in tax increases from the state, the last thing Minnesotans can afford is higher property taxes on top of it.”
Sen. Nelson indicated during the press conference the cost of Paid Family Medical Leave (PFML) alone could be a $60 million tax increase to school districts: $30 paid by school districts as employers, and $30 million paid by teachers and school staff. The fiscal analysis on the cost of PFML to local governments has not yet been completed.
With the election putting Democrats in full control of government without a check from Republicans, Democrats have drastically expanded the agenda they ran on last year. Despite promises to end the tax on Social Security and return the surplus, the session has seen very little tax relief and no effort to return the surplus with rebates or tax cuts. Despite bipartisan support on a procedural vote in the Senate, a full elimination of the Social Security tax seems to be stalled without the political will by four freshman Democrats who have yet to make good on their campaign promise.
“A lot of promises to eliminate the state income tax on social security benefits were made on the campaign trail” Sen. Jeremy Miller (R- Winona) said. “Minnesota is one of only eleven states that still taxes social security benefits. It is time for us to vote to eliminate this tax and provide our seniors some much needed relief. Minnesota seniors have been waiting for us to act for too long.”
Senate Republicans proposed their own tax ideas last month that would cut taxes by much more than the dollar amount Democrats want to raise taxes. The Republican “Give it Back” plan cut taxes for Minnesotans by $13 billion with a mix of permanent tax relief, one-time rebate checks, and short-term tax credit. It includes the full elimination of the Social Security tax cut, a 1% tax cut on both the lowest two income tax rates, property tax relief, rebate checks to every taxpayer, and a child tax credit for families.
“Minnesotans shouldn’t face another Tax Day with the empty wallets and struggling to make ends meet. Republicans have outlined a proposal to return this enormous surplus to taxpayers and give them the help they need to keep up with the rising costs in their lives,” Sen. Johnson said.
The six bills considered add up to $9.69 billion in higher taxes and fees. There are additional fees in other budget bills and policy provisions, meaning $13 billion is not the maximum that taxpayers could be on the hook for- it will likely be more.
The six bills the Republicans used for their assessment are:
Transportation Budget Bill: $3.56 billion in tax and fee increases including:
- Motor Vehicle Registration Tax increase of $736 million over four years
- Motor Vehicle Sales Tax increase of $2214 million over four years
- Retail Delivery Fee (remains alive in the House) of $512 million from FY ‘25-27
Source: Dept of Revenue Analysis on H.F. 2887, April 4, 2023
Housing Bill: $744 million from the Metro Sales Tax (remains alive in the House)
Source: Dept of Revenue Analysis on H.F. 2335, April 3, 2023
Paid Family Medical Leave: $2.9 billion tax increase on every employee and business in the state. Using the most recent non-partisan Senate Fiscal Note, the bill includes a .07% payroll tax to cover benefits beginning in 2025 and takes $1.7 billion from the surplus this year as starter cash.
Source: Non-partisan Senate Fiscal Analysis of H.F. 2, April 13, 2023
5th Tier Income Tax: $1 billion increase with new fifth tier tax; Gov. Dayton added the fourth tier tax level just 10 years ago.
- If enacted, this would have an impact on this year’s taxes due tomorrow for more than 24,000 returns with an average increase in tax of $9,231 per return
Source: Dept. of Revenue Analysis of H.F. 442, April 10, 2023
Corporate Franchise Tax: $1.169 billion increase on businesses simply for the “pleasure” of doing business in Minnesota.
Source: Dept. of Revenue Analysis HF 2883, April 10, 2023
Cannabis: $269 million in fees and taxes on legal cannabis
Source: Dept. of Revenue Analysis of HF 100/SF 73, March 31, 2023