Capitol Watch: Walz unilaterally raises Family Leave tax

Gov. Tim Walz unilaterally raised the payroll tax paid by every employer and employee in Minnesota this week from .7% of wages to .88%. The legislature gave Walz the power to raise the tax up to 1.2% if his Department of Employment and Economic Development (DEED) determines it’s necessary to fund the program. Employees will be allowed to tap into the fund created by the tax (and an initial $668 million from the 2023 surplus) to take up to 20 weeks off to take care of themselves or their relatives.

During debate on the bill, Republicans (and our economists) tried to warn Walz and the Democrats that the costs of the benefits would outstrip the predicted revenue. But they voted for it anyway out of misplaced empathy and compassion for “working folks.” But working folks are the ones who will be hit hardest by this new payroll tax. The fact that the .88% tax is levied on the first dollar of income makes this a very regressive tax, with people at the lowest levels paying the highest percentage of their income in taxes. Another example of Minnesota liberals claiming to tax the rich but always hitting the poor.

In addition to the tax implications, imagine what the leave program is going to do to small businesses forced to cover an employee’s temporary absence. Human nature tells us the program will be abused and by the end of 2026 we’ll be adding it to our scandal tracker.

The 2023 legislature also allocated over $100 million to set up the bureaucracy needed to administer this massive new government program. We tested support for Paid Family Leave in the Winter 2023 Thinking Minnesota Poll. Not surprisingly, the concept is very popular, with 74 percent of Minnesotans in favor and only 23 percent against. But the devil is in the details. Support falls when respondents learn paid leave proposals will require a new state government bureaucracy with hundreds of new employees. With that information, 56 percent are less likely to support it.

The 2025 DFL legislative agendas

Two weeks ago, we wrote about the Minnesota House Republican legislative agenda as outlined in their first twenty bill introductions. Today we examine the House and Senate DFL legislative agendas laid out in two separate press conferences.

House Democrats met with the press off campus during their boycott and presented an agenda focused on housing, childcare and health care. Their agenda is high on rhetoric and short on detailed proposals.

For childcare, they plan to “reduce the cost of childcare for hard-working Minnesotans” and “protect Paid Family and Medical Leave from wealthy and powerful interests that would seek to weaken, undermine, or repeal it.” (I guess that would be us)

For housing, House DFLers would:

• Crack down on out-of-state corporations and hedge funds that are taking away home ownership opportunities from Minnesotans
• Stop price fixing schemes that large landlords use to illegally increase rents Minnesotans are being nickeled and dimed — overcharged and underpaid — by Wall Street billionaires and corporate monopolies that keep raising our prices, limiting our options, and taking away our freedoms to make more profit for themselves.

In health care, they would:

• Expand access to out-of-pocket price caps on prescription drugs, including insulin, inhalers, and EpiPens
• Increase access to dental, maternal, and mental health care in underserved communities across the state
• Combat reduction and elimination of hospital services, particularly in Greater Minnesota, to protect access to the care Minnesotans need like labor and delivery
• Continue working to expand mental health care including treating substance use disorder

For energy, DFLers would:

• Continue to incentivize improved energy efficiency for homes and commercial buildings, helping families and small businesses with their energy costs
• Stay on track for 100% carbon-free energy by 2040 CLEAN WATER – DFLers will ensure safe and clean drinking water and reduce health disparities by updating our water infrastructure
• Continue funding the replacement of all lead pipes in Minnesota
• Defend PFAS regulations that protect Minnesotans from cancer-causing chemicals

Senate Democrats’ agenda

Senate Democrats outlined their agenda at a February 10 press conference at the State Capitol. Majority Leader Erin Murphy named three priorities for 2025:

• Balancing the budget, equitably for communities across the state of Minnesota. Focusing on ways to reduce costs in childcare, housing and health care while investing in important things like infrastructure and jobs.
• Hold the line on the important things we did accomplish in the last two years.
• Protect Minnesotans from the things that are coming from Washington D.C. “We’re concerned about what we’re seeing with the chaos agenda from Trump and his Muskateers, and we want to make sure Minnesotans understand that we are here for them and for our collective future together.”

Our collective future? Who talks like that?

The legislative priorities of both Senate and House Democrats is mostly warmed-over liberal topics that involve spending more taxpayer money in an effort to look empathetic to the plight of “working people.” Liberals in St. Paul ignore the fact that flooding markets like childcare, health care and housing with government subsidies always ends up raising the cost to consumers.  

In laying out their legislative priorities, Minnesota Democrats prop up bogeymen like wealthy and powerful interests, out-of-state corporations, hedge funds, large landlords, Wall Street billionaires, corporate monopolies, insurance companies, Big Pharma, Trump & the GOP, and the Muskateers. It’s an agenda that plays on fear and lacks any hope for the future.