House Democrat’s failed tax hike stunt has caused chaos for tax refunds

In June, a bill passed in St. Paul waiving taxes owed on 2020 unemployment benefits and, something we argued for, payroll loans. Incredibly for a state government that is so adept at spending taxpayer’s money, the process is turning into a fiasco.

Last week, Fox 9 reported:

After two months, Minnesota revenue officials cannot say when they’ll start sending out checks to 550,000 taxpayers owed refunds on 2020 unemployment benefits and payroll loans.

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…the Minnesota Department of Revenue has not sent out the refunds — worth $454 million for the payroll loans and $234 million on unemployment benefits — and blames the delay on a system change.

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The saga started when the divided Legislature missed the tax filing deadline. Minnesota law required the payroll loans and unemployment benefits to be treated as taxable income, throwing the state out of balance with the federal government, which had forgiven the full amount of PPP loans and the first $10,200 of 2020 jobless benefits.

On May 17 — the day of the tax filing deadline, which had been extended — top lawmakers and Gov. Tim Walz announced a deal to conform to the federal government’s changes. But Revenue Department officials said they had to wait until June 30, when the bill became law, to start the refund process. [Emphasis added]

The reason “the divided Legislature missed the tax filing deadline” was, as we reported at the time, because House Democrats were holding up tax relief, using it as leverage in a failed bid to raise taxes.

While the legislators responsible for this risible bit of theater might have reaped the rewards in the form of an energized base, it is ordinary Minnesotans who are bearing the costs:

Jason Salzwedel of Zimmerman said he’s waiting on several hundred dollars from the state, money he initially owed on unemployment benefits Salzwedel collected during a two-month furlough.

Salzwedel said he tried calling the Revenue Department recently but didn’t get a satisfactory answer.

“Pretty much their explanation — if you can even call it an explanation — was there’s thousands of other people going through the same thing,” he said. “If you owe them money, they want it yesterday. All of a sudden, when they take something that’s ours, it feels like, ‘We’ll get around to it.”

In the interests of fairness, it ought to be pointed out that opposition to this farce was bipartisan. That will be little comfort to people like Mr. Salzwedel.