Tough budget battle ahead in Minnesota Legislature

The easy part for Minnesota Governor Tim Walz was putting together a two-year budget proposal to erase a nearly $1.3 billion budget deficit. At least compared to how tough it will be to sell it to the Republican-controlled Minnesota Senate.

"They’re going to tell all the folks listening today they’re going to see a tax increase," the governor said on Tuesday. "That is simply false. Income tax that we’re talking about would hit 0.7% of the population, 99.3% of people will not see that."

The governor was talking about a new fifth tier income tax level that will hit couples earning over $1 million per year or single taxpayers earning over $500,000. The Walz administration says that’s about 21,000 Minnesota households. It’s part of a plan along with corporate income tax increases, estate tax changes and cigarette, tobacco and vaping taxes that would raise about $1.6 billion.

Walz announces 2-year budget proposal including tax hikes on Minnesota’s highest earners

"Minnesota has spent too much money for too long," Republican political analyst Andy Brehm said. "We are already, without the governor’s proposed tax increases, one of the highest-taxed states in the nation. The governor has evinced time and time again he does not understand how business works. This isn’t about protecting the rich. It’s about protecting a private economy and keeping Minnesota competitive so that people can get good jobs, so that people can get raises, so they can get get those 401K matches. That’s what people need."

The governor plans to use the tax revenue to help pay for $1.3 billion in new spending.

"We are really trying to focus on what do we need to do to help people," former DFL state Sen. Jeff Hayden said. "This economy … in the middle of a pandemic, some people have done really, really well and some have done really bad. The governor’s saying he wants to tax 1% on the top 1%, right? Then help to redistribute to help those that really have lost in the pandemic; low-income workers, people of color, things of that nature. That’s who the governor’s trying to help."

Legislative committees will start taking closer looks at the budget proposal next week but can’t make any decisions until after the February budget forecast comes out in early March.

You can see more of our analysis of the budget Sunday morning at 10 a.m. on "At Issue with Tom Hauser."