Minnesota does not need tax hikes

Last month, American Experiment economist John Phelan made the case for no tax hikes in light of the fact that Minnesota’s 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 $1.3billion 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 the provision of public services. What is the reason to collect more?

The Minnesota government is not short on cash

There are of course arguments that we need to spend more to invest in Minnesotans. But even then, to the extent that Gov. Walz’s 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. Our government is spending more now than at any other time in history. Between 2010 and 2018, Minnesota’s spending per capita has grown 26% in real per capita terms. Additionally, pending on our major services, like education and welfare has accounted for more than 50% of the total growth in spending.  To the extent that we can address the disparities or hardships faced by low-income Minnesotans, that will no be through increased spending.

If Minnesota is to ensure economic opportunity for everyone, that will only be possible by enacting policies that help Minnesota’s economy grow. Raising taxes is, however, a hindrance to economic growth.