Dear Friends and Neighbors,
Minnesota Management & Budget recently issued an updated state economic forecast which projects a $9.25 billion surplus for the fiscal year ending June 30, 2023.
But there’s actually more to the story because, on top of the $9.25 billion, there is an additional $350 million in the state’s cash operating account and another $2.62 billion in the Budget Reserve Account, commonly referred to as the Rainy Day Fund.
The commissioner of MMB confirmed to me a $2.97 billion set-aside amount ($2.62 billion + $350 million) is an adequate buffer between state revenue collections and expenditures. In other words, if our set-aside figures are sufficient, Minnesota has more than $12 billion of undedicated funds.
That leaves us with the million-dollar question of what to do with $9.25 billion in surplus revenue. The governor proposes giving a portion of it back to people in the form of one-time checks. I disagree with this one-time approach and prefer taking a longer view of permanent, meaningful tax relief.
Minnesota’s tax structure is an outlier in many ways and that compromises our ability to compete nationally. The onerous tax burden in Minnesota also makes it difficult for our business leaders to grow our economy and reduces the purchasing power of every consumer in our state. This is especially damaging at a time such as this, when prices already are rising at the grocery store, at the pump and across the board for the goods and services we purchase every day.
Tax relief should be a top priority this session with the unprecedented opportunity that sits before us. Eliminating Minnesota’s Social Security tax should be at or near the top of the list and I have authored a bill to end Minnesota’s status as one of only 12 states that taxes Social Security payments to seniors. This policy of double taxation on Social Security benefits in Minnesota is wrong regardless of any other income or responsible planning on the part of the recipient.
There are numerous other sources of tax relief that would relieve the tax burden Minnesotans are carrying. I personally am the chief author of several tax-related measures in the House. Here is an overview of a handful of provisions I have introduced this session and will continue working to advance:
- 100% exclusion of all Social Security Payments from Minnesota income and taxation
- Reducing the Individual Income Tax Rate by one full percentage point for all four (4) tiers of income brackets (Our lowest income tax rate on our lowest income earners is higher than the maximum rate in 17 other states)
- Phase out and ending the Estate Tax in Minnesota
- Conforming the Estate Tax to the Federal exclusion and reducing the Minnesota Estate Tax from a maximum of 16% to 5%.
- Ending the State General Levy (a fourth property tax) on Seasonal/ Recreational Property and Commercial/Industrial Property Classes. (No other property classes pay this tax)
- A two-year phase-out of the State General Levy and reducing the current levy for 2022 by 50%
It will be interesting to see what transpires between now and when the session is scheduled to end in late May. Fellow House Republicans and I will continue advocating to return the state’s overcorrection of tax dollars to their rightful owners - the taxpayers.
Meanwhile, House Democrats and the governor seem averse to structural reforms to the over-collecting of your hard-earned money and are looking to grow government by adding more programs and entitlements, adding more perpetual structural costs to the general fund.
Let’s not be suckered in by the quick dollar they are selling. Structural reform to reduce our tax rates will provide much greater long-term benefits than a one-time rebate. I look forward to continuing this discussion throughout the session and will remain an advocate for maximizing the impact of the surplus dollars to make our state a more competitive, better place to live for the long term.
Sincerely,
Rep. Jerry Hertaus