Tax deal represents a missed opportunity

Gov. Walz and legislative leaders in the state House and Senate announced the outline of a budget deal Monday morning. Fox 9 reports:

The agreement calls for $4 billion in new spending, $4 billion in tax cuts, and leaves $4.2 billion on the budgetary bottom line in case the economy worsens. That broad framework leaves many details for lawmakers to sort out with one week left in the 2022 session.

Public schools will get $1 billion of the new spending over the next three years, according to a signed one-page agreement released by Walz’s office early Monday morning. Another $1 billion will go into health and human services, while $450 million heads to public safety. Separately, the deal calls for a $1.4 billion public infrastructure bill.

The framework calls for $1.6 billion in tax breaks over the next year and $2.4 billion in two years after that.  Senate Majority Leader Jeremy Miller said it would include income tax cuts that Senate Republicans have pushed as their top priority. It was not immediately clear whether rebate checks, as Walz and House Democrats have sought, would be included.

There is reason to be disappointed with this deal. There is already a budget in place, passed last year, which provided for the largest increase in the K-12 education formula in fifteen years. There is no pressing need to pass a budget right now.

If we are going to pass a budget, we should use the historic opportunity the forecast surplus of $9.3 billion represents to change Minnesota’s direction. We should permanently cut our state’s tax rates.

As we noted in our recent report It’s Our Surplus: Give It Back!, state government spending is already high in inflation-adjusted, per capita terms relative to both other states and previous years. These high levels of government spending have failed to solve our state’s social ills, so why would we expect a bit more to do the job?

Minnesota also has some of the highest tax rates and burdens in the United States. Research finds that such high taxes restrain economic growth and push residents out of Minnesota while deterring others from moving here.

True, permanent tax rate cuts still seem to be in the mix. While welcome, it is also the case that they will not be what they could have been. Gov. Walz’s ludicrous ‘Walz Checks’ plan seems to be in the hopper as well. We must hope that that idea gets ditched quickly.