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, adding $1 billion to the cost of health care for Minnesotans over the next two years.
“At a time when Minnesota has over a billion dollar surplus, we should be looking at ways to enact tax reform not proposing a 70 percent gas tax that will move Minnesota to the 4th highest gas tax rate in the country,” said Rep. Duane Quam, R-Byron. “We have put forth ideas, including eliminating the tax on social security, to make Minnesota a more attractive state to live, work, and retire in; but this proposal by the governor would have the opposite effect.”
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 than the state cost in calendar year 2020 of extending reinsurance, which would only cost approximately $54 million. 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.
"Minnesota families pay enough at the pump and are tired of health care continually getting more expensive," added House Deputy Minority Leader Anne Neu, R-North Branch. "The governor's plan offers no solutions to bring down health care costs, and brings back a billion dollar health care tax that makes going to the doctor more expensive for everyone."