Nothing to brag about
Minnesota didn’t raise taxes. But why not lower them?
Minnesotans escaped higher tax rates from the latest state budget — but they deserved to save more of their money because Minnesota has at least a $1.6 billion surplus.
The state has a $52 billion budget overall for the next biennium, a total that will be boosted by billions of dollars in federal money coming from COVID-19 relief packages.
“Minnesota did it again,” Gov. Tim Walz boasted at a press conference to announce the budget deal. “We found commonality amongst ourselves.”
Not amongst everyone. Millions of Minnesotans would benefit from tax cuts and Democrats have proved they were never serious about them. Last July, Walz’s budget office released a projected shortfall of $4.7 billion for the 2022-23 biennium. Walz’s response? Raise taxes. The big ones were in the form of corporate and income tax hikes.
The suggested increase in the corporate rate was from 9.8 percent to 11.25 percent, a dangerous proposition. Corporations use tax savings to provide good-paying jobs, crucial as everyone bounces back from the COVID-19 recession. And every state around Minnesota has lower rates other than Iowa, which used to have the nation’s highest corporate taxes — 12 percent — as recently as a few years ago and today matches the rate in Minnesota
That means our corporate taxes would have jumped to third in the nation after Iowa trended toward our Upper Midwest neighbors, creating a big incentive for our businesses to relocate.
Walz also wanted to surpass our top income tax rate, 9.85 percent, by creating a fifth tier of 10.85 percent. This would have bumped Minnesota from having the fourth-highest rate in the country into the top three. Once again, overtaxing high earners gives them reason to leave for low-tax states as nearby as South Dakota or as far away as Florida. A 2016 Center of the American Experiment report found that former Gov. Mark Dayton’s tax hikes led to billions of dollars of lost income from Minnesotans on the move.
The wealthiest ones aren’t the only ones who suffer. Those charged the lowest rate, 5.35 percent, still pay more than the highest rates in 25 other states.
Even more discouraging was the fact that Walz refused to back off his tax hike proposals when the expected deficit shrank from $4.7 billion to $1.2 billion. Worse yet, he continued his push for more taxes when deficits turned into the $1.6 billion surplus we have today.
Fiscal conservatives, who believe that lower tax rates raise prosperity for a maximal number of Minnesotans, called for spending cuts when forecasts were at their worst and feel even more strongly now as the state has a lot of cash to play with. They are frustrated to hear Walz brazenly declare the legislative session a success.