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Legislative News and Views - Rep. Dean Urdahl (R)

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Legislative update

Friday, January 29, 2021

Dear Neighbor, 

The big news in St. Paul this week is that Gov. Tim Walz unveiled his budget proposal for the state’s next two-year budget cycle, starting July 1.  

Our next state budget will look far different from what the governor proposes because the House and Senate will be introducing ideas of their own and months of negotiations will transpire before compromise is reached. 

Maybe the most important thing we can glean from the governor’s proposal is that he prefers using tax increases to erase our state’s modest shortfall and set a new spending plan, leaving the state to bear very little of the burden.  

Overall, the governor is seeking a budget of more than $52 billion, with $1.7 billion in tax increases and negligible spending reductions primarily linked to the state incurring lower prescription drug costs because people skipped trips to the doctor during the pandemic.

The tax increases proposed by the governor include a 15% increase to Minnesota's business (corporate) tax rate (9.8%->11.25%) which would push Minnesota to second-highest in the nation. He also is seeking a 10% increase to the top tax bracket, creating a fifth tier and giving Minnesota the third-highest income tax rate in the nation.

It should be mentioned that, while the governor is couching his plan as though it would make the rich pay their “fair share,” it’s not that simple and, in fact, virtually all of us would be impacted one way or another. The Minnesota Department of Revenue confirms that corporate taxes result in increased taxes on low- and middle-income families, with 43% falling on Minnesota consumers through higher prices, 43% on other state consumers/employees, and 5% on employees (layoffs, wage reductions, reduction of hours, etc). In other words, corporate tax increase end up falling only 9% on the company (owners/shareholders) and 91% on consumers and employees.  

In addition, $941 million of the governor's $1.7 billion in tax increases are regressive taxes that will impact Minnesotans of every income level. This includes raising regressive taxes on cigarettes and vaping products as he proposes. 

All this is to say we must realize that, whomever the target of the governor’s tax increases, we all can expect to feel the impacts. Our objective should be to assemble a bipartisan budget that requires the state carry some responsibility in balancing our budget as we also protect our families and businesses from suffering further damage amid these uncertain economic times. 

The budget will be an ongoing topic of discussion over the next handful of months as we work toward agreement before the Legislature is set to adjourn in late May. We will receive an updated economic forecast a month or so from now and figures from that report will provide the framework necessary for the budget process to begin in earnest.