Commentary: Gov. Tim Walz’s proposed tax increases not needed
The author, Minnesota State Rep. Jordan Rasmusson, is a Republican who represents District 8A, which includes much of western Otter Tail County and goes as far east as Perham.
The Legislature’s top priority for the 2021 session is to establish a new, two-year state budget.
The governor put the first stake in the ground when he recently issued his budget proposal. The House and the Senate will soon follow suit, setting the stage for negotiations to take place with the goal of having a budget passed by the time the Legislature adjourns in late May.
The governor’s $52.4 billion budget proposal for the 2021-22 biennium represents a spending increase of 9.5% above the state’s current operating budget. His plan includes a $1.7 billion tax increase with only $150 million in savings in state spending, or just 0.3% of the state budget.
The governor’s tax increases include a 15% hike to Minnesota's business tax rate, making ours the second-highest rate in the nation. He also proposes a 10% increase to the top personal income tax rate, creating a fifth tier and giving Minnesota the third-highest income tax rate in the nation.
This budget proposal is being offered under the guise of making the rich “pay their fair share” but the impacts would be felt by all of us, across all income brackets. Walz’s own Department of Revenue confirms that corporate taxes result in increased taxes on low- and middle-income families, with 43% falling on Minnesota consumers through higher prices, 43% on other state consumers/employees, and 5% on employees (layoffs, wage reductions, reduction of hours, etc.). In other words, corporate tax increases end-up falling only 9% on the company’s owners and 91% on consumers and employees.
In our area, we can see a striking phenomenon taking place along the Red River: Grand Forks is bigger than East Grand Forks; Fargo is bigger than Moorhead; Wahpeton is bigger than Breckenridge; and it is not because the prairie is any fairer on the North Dakota side of the river. It is due to Minnesota's tax and regulatory environment. The governor’s proposed tax increases would only further harm Minnesota’s economic competitiveness and cause more families and businesses to move to other states.
The good news is the governor’s proposal is just the first step in what will be a months-long process. I will continue advocating for a budget that focuses on responsible spending limits and taxpayer protection. We recently learned state revenues in January were $296 million (14.1 percent) more than forecast, with individual income, sales, and corporate taxes all exceeding previous expectations. This is further evidence tax increases are unnecessary and should set an optimistic tone for budget negotiations to begin in earnest after the February forecast provides full details of our state’s economy and bottom line.