Minnesota Governor Walz Proposes Tax Credit for 2.5 Million Families

Millions of Minnesota families would receive checks totaling up to $2,600 from the state’s massive surplus under the budget plan Gov. Tim Walz announced Tuesday, saying it would give residents the largest package of tax cuts in state history.

The direct payments are the centerpiece of a comprehensive $65 billion two-year budget plan that he unveiled Tuesday, after unveiling other proposals over the past week to increase spending on education, families, health, public safety and housing.

“This is a fair budget that will continue to create growth, lower taxes for Minnesotans while improving all aspects of their lives,” Walz said.


The checks would be structured as tax credits equal to $2,000 for families earning less than $150,000 and $1,000 for single taxpayers earning less than $75,000. They would be exempt from federal taxes. Taxpayers could also get an additional $200 for each dependent, up to three. But those who earn more than the revenue caps will get nothing, revenue commissioner Paul Marquart acknowledged.

More than 2.5 million people in Minnesota would receive the checks if lawmakers approve the plan, the administration said.

Walz’s proposed budget also includes expanded tax credits for families with children and for child care expenses. In all, a middle-class family of four could recoup $10,000, she said.

The Democratic governor’s budget also includes lower taxes on Social Security income for more than 350,000 households, but not a complete elimination of the tax, as Republicans and some Democratic lawmakers had hoped. Social Security recipients with high overall income still owe taxes on their benefits. But 43% of households receiving Social Security would save an average of $278 this year.

The tax cuts amount to $5.4 billion in relief, Budget Commissioner Jim Schowalter said.

Republican leaders were quick to criticize the governor’s plan for its huge jump in overall spending from the $54 billion in the current budget, which runs through June, and for its unwillingness to use the record surplus to eliminate taxes altogether. State Social Security on all income. levels or permanently reduce tax rates.

“We currently have a surplus of $17.6 billion. This budget spends all of that. Not only that, but it increases the government by 25%,” Senate Minority Leader Mark Johnson of East Grand Forks told reporters.

“If we can’t cut taxes now, when can we?” asked House Minority Leader Lisa Demuth of Cold Spring.

Democratic Minnesota Gov. Tim Walz proposed tax credit checks of up to $2,600 for 2.5 million families in a budget announcement Tuesday.
(Glen Stubbe/Star Tribune via AP)

The surplus results from a combination of stronger-than-expected tax revenue and lower spending, creating opportunities for a host of one-time spending, including the governor’s proposed tax credits. But the projected future revenue increases that could support ongoing spending or tax cuts are minor.

The governor’s budget proposal lays the groundwork for the main work of the 2023 legislative session. But his fellow Democrats, who now control both chambers, will have their own ideas about spending and fiscal priorities, and the final budget will be the product of committee hearings, floor debates, and private negotiations over the next few months.

The initial reaction from Democratic legislative leaders was positive, if evasive on key details of the governor’s budget.

“I congratulate the Governor for proposing a bold budget with an inspiring vision for our future,” House Speaker Melissa Hortman of Brooklyn Park said in a statement. “I look forward to our continued partnership as we craft our budget and pass legislation to build a Minnesota that works better for everyone.”

“Governor Walz’s budget reflects many of the priorities Minnesotans have told us they value, including proposals that will build an economy that works for everyone by lowering costs for families and ensuring strong schools, safe communities, and a healthy climate. “said Senate Majority Leader Kari Dziedzic. , of Minneapolis, she said in a statement.

Walz also proposed paying off the state’s portion of the debt at US Bank Stadium, the home of the Minnesota Vikings, 22 years earlier. Revenue from electronic and paper gambling, which is now earmarked to retire stadium debt and is stronger than initially expected, would go into the state’s general fund, Schowalter said.


The governor’s budget also includes some tax increases that are sure to spark debate, including an increase in capital gains taxes for high-income taxpayers and a payroll tax to fund a paid family and medical leave program that would come effective in 2026. Annual motor vehicle license tab renewal fees, which decrease as the vehicle ages, would not increase but decrease more slowly.

An updated economic forecast expected by the end of February could result in adjustments. The Legislature must adjourn by May 22.

The session is already off to a fast start since it was convened on January 3. Many of the top Democratic priorities are moving quickly through the legislative process, including several proposals that have been blocked by the former Republican majority in the Senate for the past four years.

They include paid family and medical leave, legalization of recreational marijuana, climate change legislation to require Minnesota utilities to switch to carbon-free electricity by 2040, and a ban on so-called conversion therapy for LGBTQ youth.

The proposals also include funding for more prosecutors for the attorney general’s office, making driver’s licenses available regardless of immigration status, creating an Office for Missing and Murdered Black Women and Girls, banning discrimination based on hairstyles , free school meals for all students. and proposals to make voting easier, including restoring voting rights to felons when they are released from prison.


Walz signed his first bill into law just over a week into session: a $100 million tax cut that brought the state tax code into compliance with federal rules. Extended unemployment benefits for laid-off Iron Range mine workers are awaiting his signature. And the full Senate is scheduled to vote Friday on a House-passed abortion rights bill that Walz promised to sign.

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