Transformed Using "Kamala Harris" by Gage Skidmore https://flic.kr/p/RY8Rd4 - "Governor Tim Walz..." by Lorie Shaull https://flic.kr/p/2cYJKeN

Tim Walz’s official government website touts the state budget he signed in 2023, which was enacted by a Democratic-run legislature, as “the largest tax cut in state history.” In reality, that budget and related legislation imposed a multi-billion dollar net tax hike. 

“By enacting $10 billion of tax hikes over the next four years, the state government has made Minnesota even less attractive to potential residents than it was,” writes John Phelan, economist at the Center for the American experiment, a Minnesota-based think tank, about the budget signed into law by Walz last year. “It seems as though the DFL’s plan is to offset the additional ‘push’ factor of higher taxes with ‘pull’ factors such as expanded welfare and extreme social policies. Will it work? Watch this space.”

Details from the Minnesota Department of Revenue on the Tax Hikes Signed into Law By Tim Walz in 2023:

Payroll Tax

Under the budget signed into law last year, a new state payroll tax will be paid by every employee and employer. 

Retail delivery tax

Starting July 1 of this year, a fee of 50 cents is to be collected on retail deliveries in Minnesota that equal or exceed the threshold amount.

Higher Car Taxes

Starting July 1, 2023, the Motor Vehicle Sales Tax rate will increase from 6.5% to 6.875%. 

Higher Taxes on Employers

Walz expanded the scope of the corporate income tax, going after international income through global intangible low-taxed income (GILTI) taxation, a tax hike most states have rejected. Walz tried to make Minnesota the only state with worldwide combined reporting but was unable to get it through the legislature. 

Higher Taxes on Saving and Investment

The new state budget signed by Walz last year enacted a new tax on net investment income. Net investment income includes but is not limited to interest, dividends, capital gains, rental and royalty income, and other similar income. It is reduced by certain deductions, like investment interest expenses, investment advisory and brokerage fees, and similar expenses. 

This new tax is imposed on individuals, estates, and trusts with more than $1 million of net investment income in the tax year. The tax rate is 1% on the net investment income over $1 million.

Raised taxes on households through a limitation of standard and itemized deductions

Filers with incomes over $220,650 will generally see fewer tax benefits from the standard or itemized deductions. For those with AGI more than $220,650, the reduction is the lesser of:

  • 80% of the amount of the deductions
  • 3% of AGI between $220,650 and $304,970, plus 10% of AGI greater than $304,970.

Those with adjusted gross incomes (AGI) greater than $1 million will have deductions reduced 80%, rather than using the calculation above. 

These changes are effective for taxable years beginning after December 31, 2022.

New Regional Taxes, Authorization of Local Tax Hikes

The new budget imposes a 0.25% sales tax on sales and purchases in the seven-county metro area. The counties include Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington. The revenues from this tax will support housing projects in the metro area.

The budget also implements a new 0.75% sales tax on sales and purchases in the seven-county metro area. The counties include Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington. The revenues from this tax will support transportation projects in the metro area.

Those are just the tax hikes that Governor Walz signed into law last year, which were the first tax hikes imposed on Minnesotans since 2008. During his first year in office, Governor Walz attempted to fund a massive increase in spending with tax hikes, but was stymied at the time by legislators. Even the left-leaning Minneapolis Star-Tribune editorial board found Walz’s first budget to be a bit much, writing that it was “too big” and that it would increase state spending “by more than $2 billion and taxes by at least $1.2 billion, substantially more if the state extends a health care provider tax that sunsets at the end of 2019.”

The fact that even the Star-Tribune argued Walz wants to tax and spend too much demonstrates how immoderate of a politician Tim Walz is, at least when it comes to fiscal policy and pocketbook issues. 

Stay tuned to ATR’s Kamalanomics.org for updates.