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 and would add $1 billion to the cost of healthcare for Minnesotans over the next two years.
Following the announcement, Rep. Barb Haley (R-Red Wing) issued the following statement.
“I am disappointed to see the large tax increases that are included in the governor’s budget proposal,” said Rep. Haley. “There’s no reason we should be considering increasing taxes by over $3 billion when our state has a surplus exceeding $1.5 billion. Our community already faces a high tax burden, and these tax increases will especially hurt families and small businesses in our area and will result in higher gas prices and healthcare costs. A gas tax hike would also disproportionately hurt our area’s farmers who are already suffering from low crop prices. Minnesotans already pay enough at the pump and are frustrated by healthcare costs continuing to rise. I intend to prioritize these concerns and look for ways to reduce taxes rather than increase them.”
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 as the state cost in calendar year 2020 of extending reinsurance, which would only cost approximately $54 million and is already funded. 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.