ST. PAUL, MN—Governor Tim Walz released his budget proposal for the FY20-21 biennium on Tuesday, highlighted by more than $3 billion in tax increases over the next two years alone, and $4.7 billion in tax increases for FY22-23. His proposal would raise Minnesota's gas tax by twenty cents—a massive 70 percent increase—vaulting Minnesota's gas tax to 4th highest in the nation. It also includes increases to tab fees, the motor vehicle sales tax, the Metro Area sales tax, business taxes, and reinstatement of the sick tax, which is set to expire at the end of the year and would add $1 billion to the cost of healthcare for Minnesotans over the next two years.
Following the announcement, State Rep. Peggy Scott (R-Andover) issued the following statement.
“Given our state’s healthy budget surplus, I am disappointed to see massive tax increases included in the governor’s budget proposal,” said Scott. “This budget would make life more expensive for every Minnesotan and would result in higher gas prices, more expensive healthcare, and increased license tab fees. Minnesota is already one of the highest-taxed states in the country, and there is no need for further tax hikes to the tune of $3 billion. In the coming weeks, I look forward to working with other legislators to put together a responsible budget that respects the pocketbooks of families in our community and around the state.”
In FY20-21, the Governor's budget raises general fund tax revenue by $1.224 billion. The extension of the sick tax adds an additional $947 million, with transportation-related taxes adding $907 million for a total tax increase of $3.078 billion. In FY22-23, the tax increases balloon dramatically; the governor increases general fund tax revenue by $1.43 billion, with another $1.52 billion for the sick tax and $1.73 billion in transportation taxes.
Governor Walz's plan also fails to extend reinsurance, which could cause rates to skyrocket once again by 50% or more on the individual market. Instead of extending reinsurance, the governor has proposed a 20% premium subsidy only for those who do not receive federal tax credits under the Affordable Care Act. The cost in calendar year 2020 of the 20% rebate is approximately $106 million, which would only impact about half the market. The 20 percent subsidy is twice as expensive as the state cost in calendar year 2020 of extending reinsurance, which would only cost approximately $54 million and is already funded. The Governor's proposal would do nothing to prevent rates from skyrocketing, and would very likely mean that the administration is proposing to pay twice as much so Minnesotans can ultimately pay higher premiums on the individual market.