Minnesota does not need tax hikes

Last month, American Experiment economist John Phelan explained that Minnesota does not need tax hikes, especially since January revenues were higher than projected. As he explained,

A new forecast for 2022-2023 is due later this month. There is pretty widespread agreement that it will see that $1.3 billion deficit disappear. If it does vanish, so will any vestige of an excuse Gov. Walz has to hike taxes.

Indeed, the new forecast shows that our deficit has turned into a large surplus. As reported by the Minnesota Management and Budget,

Minnesota’s budget outlook is significantly better for this biennium and the next due to an improved U.S. economic outlook that is bolstered by large federal actions that have emerged since November and were not incorporated in earlier projections. There is no longer an anticipated shortfall for FY 2022-23 and we now project a positive balance of $1.6 billion because of a higher revenue forecast, lower state spending, and an increased surplus for the current fiscal year.

Gov. Walz’s proposal for tax hikes was based on an earlier forecast that predicted a $1.3 billion deficit for the 2022-2023 biennium.

Even then, the proposal was a bad idea. But in light of the new forecast, there is even less logic for Gov. Walz to demand more of taxpayers’ money. Our government is already collecting more than enough money to fund current public services.

The Minnesota state government is not short of cash

There are, of course, arguments that we need to spend more to invest in Minnesotans. But to the extent that Gov. Walz would like to keep new spending programs intact, they can be covered entirely by the budget surplus.Increased spending, however, is not something to prioritize. The Minnesota state government is spending more now than at any other point in history.

Per capita spending in Minnesota has grown 26 percent in real terms between 2010 and 2018. Additionally, spending on major services, like education and welfare, has accounted for more than 50 percent of the total growth. More spending will not address the hardships faced by low-income Minnesotans.

If Minnesota is to ensure economic opportunity for everyone, that will only be possible by enacting pro-growth policies. Raising taxes is, however, a hindrance to economic growth.