Monday, June 6th, 2022
The 2022 Legislative session is official in our rearview mirror, but talks of a special session are still skirting around the capitol. When midnight struck we had not reached deals on several big spending omnibus bills pushed by the triumvirate.
Normally, the second year of the legislative session focuses on borrowing (bonding) for capital projects and infrastructure and policy. The legislature already passed, and the Governor signed a budget last year. The state government is fully funded for the next two years. But given that there is either a 9.6 or a 12-billion-dollar surplus (depending on how you count it) there was hope from republicans that we could get tax cuts and some reform to stop overtaxing our citizens and businesses, causing them to flee the state. The DFL and some Republicans saw it as an opportunity to spend more money or to trade more spending for some tax reforms.
The “deal” that was announced by House and Senate Leadership was that the Governor was supposed to spend $4 billion, give $4 billion in tax relief (most of it one-time, not permanent), and leave $4 billion on the bottom line for next session.
When Senate Republicans looked at this deal, they decided no deal was better than a bad deal and they ran out the clock waiting for the DFL house to come up with a better offer. They produced offers even worse than this one until midnight on May 23rd.
Will there be a special session? House Democrats now want the Governor to call a Special Session to have the Legislature come back to pass their spending proposals. Let's hope not. From our point of view, we just dodged multi-year billions of dollars spending increase that would drain the surplus in just a few short years. If all of the DFL bills had passed both houses and had been signed into law we'd be looking at a 15-17% increase in the state budget.
The DFL and Governor Walz wanted to pile on the entitlements, which would mean committing future legislatures to new programs with no surplus left to pay for them. Goodbye tax cuts, hello tax increases!
Unfortunately the Legislature did not pass the 2022 tax bill into law. The House and Senate leadership came to an agreement twice, first in general terms and then in more specific terms. Although the Conference Committee kept saying they had an agreement, no tax bill was ever signed by the conference committee. The chairs held a press conference in which they described "the deal." And even signed, not a conference committee report but "an agreement."
The "deal" that was announced by House and Senate Leadership was that the Governor was supposed to spend $4 billion, give $4 billion in tax relief, and leave $4 billion on the bottom line for the next session.
But even the "$4 billion in tax relief" was a mirage. Most of it was one-time money, not permanent tax cuts. Furthermore, as much as half of the $4 billion was going to go to expanding refundable credits (credits to people that were more than the taxes they owed) and direct payments (Local Government Aid) to cities and towns in hopes that they would use the money to lower property taxes. No guarantee that they would.
What about the Social Security Tax Subtraction ("Removing the tax on social security")?
This is an issue Republicans and some Democrats have long sought to resolve. They have chipped away at it, making it nontaxable for people with lower incomes (who probably don't owe much in taxes anyway) but still leaving a considerable number of seniors with some income from retirement savings feeling the pinch. At some level, the argument for removing the tax is simply common sense. If Social Security is supposed to be your old-age insurance, accrued during your working life paycheck by paycheck, why does the government need to stick its hand in your pocket yet again? And not just the federal government, but the state of Minnesota, where you may or may not have been during your working life. It's especially galling because Minnesota is now only one of a handful of states that still tax social security.
In their negotiations, House Democrats held tax relief hostage, arguing they would only support tax cuts, including eliminating the state tax on Social Security, if they got to spend $4 billion and got to design the rest of the "tax relief" so that much of it went to people who didn't pay taxes.
Thank you for being engaged in your government,
State Representative, 23B
If you have any questions, please don’t hesitate to contact my office or me. We are still attempting to provide regular contact remotely, so if you have other needs, please email my Legislative Assistant, Grayson, at Grayson.email@example.com.
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