ST. PAUL – Gov. Tim Walz has released his budget proposal for the 2020-21 biennium. It proposes to add more than $3 billion in new tax increases over the next two years and grows to $4.7 billion in tax increases for 2022-23 biennium.
The governor proposes to raise Minnesota’s gas tax by 20 cents per gallon, a 70-percent increase. That would move Minnesota’s current 28.6 cents per gallon gas tax from the middle of pack to fourth-highest in the nation. Walz also proposes raising annual auto license tab fees and the motor vehicle sales tax.
“It doesn’t make sense. Gov. Walz proposes to almost double the gas tax, but would take away the $400 million in auto parts sales taxes revenue we previously programed to fund roads and bridges.” said Rep. Dale Lueck, R-Aitkin. “If you own and maintain a car, the sales tax from buying a new battery, tires, windshield wipers and repairing your car goes to fixing our roads. I don’t agree with taking those dollars away from fixing our roads and bridges and dumping them into the general fund. Asking folks to pony up new tax dollars to replace existing tax dollars might be the way it’s done in Washington D.C., but this is Minnesota, we can do better than that.”
The governor’s plan also includes increases to the metro area sales tax, business taxes, and reinstatement of the 2 percent tax on all healthcare services, which is set to expire at the end of the year, adding about $1 billion to health care costs for Minnesotans over the next two years.
The governor’s budget also does not extend Minnesota’s reinsurance program, which could send insurance rates rising again by 50 percent or more in the individual insurance market. Instead of extending reinsurance, the governor has proposed a 20-percent premium subsidy only for those who do not receive federal tax credits under the Affordable Care Act.
“We have a lot of work to do on the governor’s proposal,” Lueck said. “It would raise state spending by about 8.6 percent over what we are currently spending. Despite a pretty good economy, wages for working families and the folks on pensions have not seen that kind of increase. We need to put some kitchen-table common sense to work on this budget.”
In 2020-21, the governor’s budget raises general fund tax revenue by $1.2 billion. The extension of the 2 percent tax on all healthcare services adds an additional $947 million, with new transportation-related taxes adding $907 million for a total tax increase of $3.1 billion. In 2022-23, the tax increases balloon dramatically; the governor increases general fund tax revenue by $1.4 billion, with another $1.5 billion on healthcare services and $1.7 billion in transportation taxes.