Minnesota Gov. Tim Walz unveiled his revised state budget Thursday to take into account the state's recent $1.6 billion projected surplus, with more funding also heading to the state due to President Joe Biden's $1.9 trillion COVID relief bill.
Walz last put out a budget proposal in January, when the state was facing a projected deficit of nearly $1.3 billion. His revised budget increases tax relief and new investments, while keeping the proposed state tax increase on the richest Minnesotans making more than $1 million-a-year.
“Minnesotans have met the challenges of COVID-19 pandemic as they always do when faced with hardship—with grit and resiliency. But we know that our students, working families, and small businesses have borne the brunt of this pandemic,” Walz said in a statement.
“That is why, with the recent good news that Minnesota now projects a positive budget balance, we’re recommending additional investments to support working families, ensure students catch up on learning, and help small businesses stay afloat while driving economic recovery.
The budget will also keep $491 million in the state’s budget reserve.
The revised budget increases tax cuts for families, businesses and people receiving unemployment benefits to a total of $1 billion. The previous budget proposal included $230 million in tax cuts.
People who received unemployment benefits in 2020 would be able to claim relief on the first $10,200 of it on their tax return. Walz’s office estimates the new unemployment benefits tax relief will affect around 500,000 households.
The revised budget expands eligibility for a renter’s credit that allows renters to receive a refund of the property taxes they pay through their rents. The new budget will increase maximum refund amounts and expand income eligibility.
The working family tax credit would also expand eligibility to 19 and 20-year-olds and low-wage workers without dependents under the new budget.
The new budget proposal does keep a new fifth-tier tax bracket for households making more than $1 million, and is also keeping the proposed increase on capital gains tax of 1% on profits between $500,000 and $1 million and 4% if more than $1 million.
Walz's budget keeping his increase in the the corporate tax rate for profitable businesses, but has reduced it to 10.8% from the originally planned 11.25%. It is currently 9.8%.
In total, the revised budget includes $670 million in new tax increases, compared to more than $1.6 billion in the previous proposal, according to MPR. It nonetheless drew a rebuke from Senate Majority Leader Paul Gazelka, who says no tax increases are necessary given the surplus and the funding coming from the federal government.
Walz's new budget also includes $68 million in one-time funding to help K-12 schools and districts recover from COVID-19 financial hardships.
Republicans push for tax exemption of PPP loans
Walz’s proposal would exempt the first $350,000 of Paycheck Protection Program loans given to businesses during the pandemic from tax, which covers 90% of loans in Minnesota, according to his office.
Minnesota GOP leaders have pushed for complete exemption for PPP loans, following the lead of the federal government. As part of the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 passed by Congress in late 2020, all PPP loans meeting specific criteria are exempt from federal taxes.
"Taking money from struggling businesses is indefensible when state government is flush with cash," House Minority Leader Kurt Daudt, R-Crown, said in a statement.
"We have billions of dollars available to fully protect workers and businesses from unnecessary tax hikes, and ensure that government is not profiting off relief dollars intended to help Minnesotans."
House Republicans plan to force a vote to make PPP loans in Minnesota completely exempt from state taxes, according to an announcement from the caucus.
Republicans in the Minnesota Senate issued their own proposal in response to the budget surplus, which included full relief on PPP loans and unemployment payments made during the pandemic, as well as extending Minnesota's reinsurance program that subsidizes the state's health insurance providers to limit premium increases.
The GOP also proposed a 5% cut in government spending, which was criticized by House DFLers who claim it would reduce spending on agriculture, rural development, housing and veterans, per the Star Tribune.