The top priority of the 2021 legislative session is to craft a budget for the next two years. The task could be made a bit more difficult for lawmakers this year as Minnesota currently faces a projected $1.2 billion deficit (though that number will be updated in late February).
In years past, the legislature had to overcome significant budget deficits which led to many difficult decisions. That process is likely to continue again this year.
With Minnesota spending approximately $50 billion on state government programs already this biennium, my preference would be to find ways to reduce and/or prioritize government spending in order to eliminate any projected deficit, or utilize some of the $2 billion that currently sits in budget reserves.
Keep in mind, we are in a deficit solely due to COVID-19. A year ago, we were debating how to allocate a $1 billion surplus. Then the pandemic struck, the governor issued numerous executive orders that forced businesses to close and residents to become unemployed, and our economy took a turn for the worse. This is not the time to increase taxes on those that are hurting the most.
The most recent economic forecasts have been more positive, suggesting that by March our deficit could be even less than the $1.2 billion projection. In other words, with all of the tools we have at our disposal - allowing businesses to safely reopen and help our state's economy flourish once again, utilizing our budget reserves - there certainly wouldn't be a need to raise anyone's taxes over the next two years.
Governor Walz sees things differently. Recently he unveiled his required budget and framework for the next biennium and he wants to raise taxes by $1.7 billion, and raise state spending by nearly $2.5 billion, for a total budget of a little over $52 billion for the next two years.
The governor's tax increase plan includes a 15% hike to Minnesota's business tax, which ultimately gets passed on to the consumer. It also includes a $1 increase per pack of cigarettes, which disproportionately impacts lower income. The proposal does include a small tax reduction in the lower income tax tiers, but that is offset by a 10% increase in the upper tier. All in all, the proposal would make Minnesota the third highest taxed state.
As to spending cuts, they are difficult to find. He has only proposed $150 million in spending reductions. That amounts to .3%.
Now that Governor Walz has given us his roadmap, both the House and Senate will begin debating budgets of their own. We will eventually find topics where we agree, but when it comes to tax increases, I'm fairly confident the Legislature will not be approving a budget that contains significant tax hikes on Minnesota's families.