This February, newly-inaugurated Minnesota Governor Tim Walz, laid out his executive budget for fiscal year 2020-2021. Waltz’s budget included $882 million in new spending to be paid for by various tax hikes, notably a 20 cent/gallon hike to the gas tax. Recent polling shows 65% of Minnesotans oppose a gas tax increase.
The Democrat-controlled Minnesota House and Republican-controlled Minnesota Senate are still split on spending plans as we enter the final weeks of this legislative session.
Regarding transportation, the Minnesota House has proposed a $7.28 billion spending increase. This would be paid for by a gas tax hike which mirrors that proposed by Governor Walz – an increase of 20 cents/gallon, or 70% – which would be indexed to inflation annually. They are also calling for an increase to the metro sales tax. Rather than irresponsibly rely on Minnesotans to fund spending increases, the Senate’s proposal rejects these proposed tax hikes.
There is however a Senate bill floating that would make Minnesota’s electric vehicle fees the highest in the nation.
The Senate is right in protecting Minnesotans from a gas tax hike. The gas tax – a regressive sales tax – will only serve to hurt Minnesota’s lowest earners the most. Minnesotans have benefited greatly from federal tax reform, and a gas tax hike would serve to undo this success; According to Strategas Research Partners,60% of the federal income tax cut would be wiped out by a gas tax hike. In addition, gas tax hikes have historically done little to address gaps in state transportation budgets, meaning Minnesotans would be shouldering a massive new tax burden with the state government having little to show for it.
Senate Republicans and House Democrats are also in disagreement as to the state’ssick tax on medical providers which is set to sunset at the end of the year. The 2% tax was allowed to sunset in the state’s 2011 shutdown due to an increase influx of federal funding from the Affordable Care Act.
Senate Republicans find no need for the tax to be re-instated as its burden is ultimately transferred to the sick who are actually paying medical bills. Governor Walz and House Democrats have claimed that the elimination of the tax would compromise the health of Minnesotans with little evidence. If Governor Walz and House Democrats were truly concerned about sick Minnesotans, they would support the elimination of a tax which is unfairly transferring them costs.
Interestingly, a bi-partisan Senate bill introduced in March recommends a new fee assessed on insurance claims, instead of providers.
Minnesota is also on the verge of imposing a tax on pain medication. SF 751 and HF 400 both seek to raise $20 million by imposing a new fee, or raising existing fees on manufacturers and distributors. These fees are in reality taxes, since they raise revenue.
A tax which would serve only to increase costs for all Minnesotans without directly addressing the opioid issue is irresponsible and unfair. Patients would be punished with this tax, and the damage would not stop there. Everyone would pay more due to rising insurance premiums. A recent op-ed by ATR President Grover Norquist explores this disastrous policy further.
Ultimately, Minnesotans should not have to pay for rash spending increases by their state government with a higher tax burden, especially at a time when the North Star State is sitting on a large surplus. Governor Walz and House Democrats should reconsider their priorities and put Minnesotans first. Senate Republicans must continue to push back on hasty tax hikes as the legislative session is drawing to a close to keep their constituents safe.