Minnesota Democrats call for $1,000 rebate checks but Republicans want permanent tax cuts

By: - June 22, 2022 2:35 pm

Gov. Tim Walz speaks on a budget deal announced on May 16, 2022. He is joined by and House Majority Leader Ryan Winkler, DFL-Golden Valley, left. Senate Majority Leader Jeremy Miller, R-Winona, right. Photo by Catherine J. Davis/Senate Media Services

Gov. Tim Walz called on Republicans to return to the Capitol to sign off on sending $1,000 checks to Minnesotans as the rising price of gas, food and everything else eats away at people’s paychecks.

“It is absolutely unconscionable not to do this,” Walz said during a Wednesday news conference.

The state is sitting on about a $7 billion budget surplus. Under Walz’s proposal, the state would rebate about $4 billion of the budget surplus to taxpayers. Individuals earning less than $165,000 would receive $1,000 and couples earning less than $275,000 would receive $2,000.

The idea revives an earlier pitch by the governor for “Walz checks,” which failed to garner much enthusiasm from his own Democratic allies in the Legislature and which Republicans called an election-year gimmick. The governorship and all legislative seats will be on the ballot this November.

Democratic legislators have since warmed to the idea as inflation surpasses a 40-year high and negotiations have stalled with Republicans on other priorities, including permanent tax cuts and spending increases for schools, nursing homes and infrastructure.

Senate Majority Leader Jeremy Miller, R-Winona, blasted the idea during a virtual news conference on Wednesday, calling the proposal a “desperate attempt by the governor to distract voters from his record of higher taxes.”

While Miller repeated the line multiple times that Republicans are “open to any ideas to put more money back in the pockets of hardworking Minnesotans,” he said they want permanent tax cuts, not one-time rebate checks.

Senate Republicans passed a package of tax cuts earlier this year totaling $8.4 billion over three years, which House Democrats balked at saying the state needed to make more investments in education, health care, public safety and infrastructure.

A month later, legislative leaders and Walz signed a deal on a budget framework, agreeing to $4 billion in tax cuts and $4 billion in spending. The deal also left $4 billion unspent in case of any future disruptions to the state economy.

However, Republicans and Democrats failed to reach a deal on the details, leaving the state’s historic surplus largely unspent before they adjourned. Walz, Miller and Democratic House Speaker Melissa Hortman continued negotiations aiming for a special session but those talks fell apart last week.

On Wednesday, Miller returned to the position that Republicans want $8.4 billion in permanent tax cuts.

Walz accuses Miller of moving the goal posts and “admiring the problem” as Republicans hope high inflation will give them an advantage in the elections.

“This is about saying no to any deal,” Walz said.

Miller also said Republicans wouldn’t support rebate checks if they were subject to federal income tax because it would send a chunk of state tax revenue to Washington. Walz says the rebate checks would be structured as tax credits to Minnesotans’ 2021 tax returns and would not be subject to state and federal income tax.

High inflation has led Republican and Democratic state leaders across the country to cut rebate checks and lower taxes, one of the only tools they have to address rising costs.

Economists warn the extra stimulus undercuts the Federal Reserve Bank’s efforts to clamp down on inflation by raising interest rates, and with it the cost of homes, cars and other large investments. Putting more money in people’s pockets may only cause demand — and with it prices — to surge higher still.

Walz said the rebate checks he’s proposing amount to “a pebble in the ocean” and wouldn’t have a meaningful impact on the broader economy.

Walz said he was recently on a call with Ben Bernanke, chair of the Federal Reserve under Presidents George W. Bush and Barack Obama, who told a group of governors that they should return surplus dollars to taxpayers if they have them.

Only the governor has the authority to call a special session, while only the Legislature has the power to adjourn one.

Asked why he doesn’t just call a special session without a deal first, Walz replied he didn’t trust Senate Republicans: “Because I want a health commissioner. Because I’d like a Department of Public Safety commissioner.”

Senate Republicans, in an unusual move, have left many members of Walz’s cabinet unconfirmed through his term, which they’ve held as bargaining chips and targets for retaliation. Senate Republicans have already ousted two commissioners, while a third resigned under threat of not being confirmed.

Miller said on Wednesday they don’t plan to remove more commissioners at this time.

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Max Nesterak
Max Nesterak

Max Nesterak is the deputy editor of the Reformer and reports on labor and housing. Previously, he was an associate producer for Minnesota Public Radio after a stint at NPR. He also co-founded the Behavioral Scientist and was a Fulbright Scholar to Berlin, Germany.