Takeaways from Gov. Tim Walz’s 2024-25 budget proposal
Rebate checks, some social security tax relief and paying off U.S. Bank Stadium debt
Gov. Tim Walz presents his budget to reporters at the Department of Revenue building in St. Paul on Tuesday, Jan. 24. Photo by Michelle Griffith/Minnesota Reformer.
Gov. Tim Walz on Tuesday proposed a historic budget that gives money to working class and low-income Minnesotans, and invests in a range of government programs aimed at improving education, housing and health and child care.
Walz’s budget would give checks to over 2.5 million Minnesotans, provide tax relief to some Social Security recipients, ramp up school spending, create a paid family leave program and pay off — two decades early — the state’s portion of the debt owed on U.S. Bank Stadium.
Walz, who’s backed by a DFL-majority Legislature for the first time during his tenure, said his budget will make life in Minnesota more affordable and a destination state for families and businesses.
“This is a fair budget that will continue to create growth — reducing taxes on Minnesotans while improving all aspects of their lives,” Walz said at a press conference at the Department of Revenue building in St. Paul. “I could not be prouder of what we’ve done.”
The Walz administration on Tuesday said its budget would create the largest tax cut in Minnesota history, but Walz’s proposal is only the first step in the state’s budget-making process. After Minnesota Management and Budget releases its latest budget forecast next month, lawmakers will use those projections and Walz’s budget as starting points to create the state’s 2024-25 biennium budget.
Here are some takeaways from Walz’s budget proposal:
An increase in spending amid a $17.6 billion budget surplus
Walz proposed a historic $65.2 billion budget, which is about 25% more than the state’s current two-year budget — though much of this is one-time spending. Historic inflation and COVID-19 pandemic assistance has handed Walz ample funds to implement the government programs he has long advocated for — paid family leave, affordable child care and one-time, non-taxable rebate checks.
Walz is proposing sending $2,000 checks to Minnesota families with income below $150,000 and $1,000 checks for single filers making less than $75,000. Checks would be sent to about 2.5 million Minnesotans, Walz said.
Unlike the “Walz checks” the DFL governor proposed during his reelection campaign, the cash this year doesn’t phase out at higher incomes. It shuts off altogether. Do you as a single filer make $75,001? Then you don’t qualify for the cash. Sending money back to Minnesotans through rebate checks would dispense with about $4 billion of the state’s surplus under Walz’s proposal.
The income threshold for qualifying for the checks — $150,000 for married filers and $75,000 for an individual — are stricter than last year’s proposal, when married filers making under about $274,000 and individuals earning less than $165,000 would qualify for a check.
Democrats in the Legislature haven’t shown widespread enthusiasm for Walz’s rebate checks, and the governor has yet to make clear how far he’s willing to go to finally get his checks into Minnesotans’ hands.
Another large chunk of spending — about $1.1 billion in the 2024-25 biennium and another $1.2 billion in the following two years — would be used for child tax credits. The tax credits would be $1,000 per child for families earning less than $50,000, with a maximum of $3,000 per family.
Despite billions in surplus, Walz proposes a tax increase
Walz’s budget proposal includes an increase in the capital gains tax, which he estimated would generate more than $660 million over the next biennium. This tax would primarily affect wealthier Minnesotans who have enough money for investments.
“That just makes it fair,” Walz said. “That creates revenue then … that’s invested back into the very things that created that wealth in the first place.”
Republicans for years have argued that implementing higher taxes for wealthy residents will encourage them to leave Minnesota in favor of Florida or another low-tax state.
“Minnesotans are fair about their taxes, and they’re willing to pay them if they believe they’re fair,” Walz said.
A fight over Social Security tax is likely
Although some Democrats — particularly in swing districts — have pledged to completely eliminate state tax on Social Security benefits, Walz’s budget would reduce the tax on Social Security benefits for about 350,000 households, while wealthier Social Security recipients would keep paying.
Sen. Aric Putnam, DFL-St. Cloud, and Rep. Dave Lislegard, DFL-Aurora, are both chief authors of bills in their respective chambers that would eliminate the tax on Social Security benefits completely. Both come from the types of swing districts that delivered Democrats their narrow legislative majorities.
“I’ve heard so many stories about this issue in our community and throughout Minnesota, how people’s lives are impacted by these taxes,” Putnam said in a statement in support of his bill earlier this month. “Whether we are talking about Social Security benefits or a firefighter’s pension, this is our chance to show our respect for those who came before us and to honor the work of those who have served us.”
Other Democrats are cautious about fully eliminating the tax on Social Security benefits, as that would eliminate over $1.1 billion in revenue during fiscal years 2024 and 2025, according to a previous Department of Revenue estimate.
Republican legislative leaders Tuesday said Walz broke his campaign promise because some Minnesotans will keep paying.
“One hundred percent (elimination) is what we were expecting. That’s what Minnesotans heard on the campaign trail. That’s what we’ve been talking about since we came into session, but unfortunately, that’s not what was proposed in the governor’s budget today,” said House Minority Leader Lisa Demuth, R-Cold Spring.
Minnesota paying off its share of U.S. Bank Stadium debt
Walz proposed paying off the state’s outstanding U.S. Bank Stadium debt about 22 years earlier than planned.
The governor’s budget invests about $377 million to pay off the state bonds on the $1.1 billion building. When the stadium was built, the state, Minneapolis and the Minnesota Vikings were responsible for the cost, with Minnesota issuing about $500 million in bonds.
Minnesota Management and Budget Commissioner Jim Schowalter said by paying off the state’s bonds now, Minnesota will save about $226 million in interest for taxpayers, like paying off a mortgage early. Minneapolis will still be on the hook for its share, but about $60 million will be forgiven, Schowalter said.
In 2012, then-Gov. Mark Dayton and the Legislature legalized a form of gambling called electronic pull-tabs to fund the state’s share of the stadium expense. Pull-tab revenue has surged in recent years, even through the COVID-19 pandemic.
With the state’s share of the U.S. Bank Stadium debt paid, pull-tab revenue will funnel straight into the state’s general fund, which would be a major victory for public employee unions and other Walz allies who want to see reliable and consistent revenue growth.
One “Extreme” Minnesota budget
Republican leaders at a press conference on Tuesday said they were disappointed and concerned with Walz’s budget. Disappointed that Walz didn’t propose fully eliminating the tax on Social Security benefits and concerned with Walz’s creation of more government programs.
Senate Minority Leader Mark Johnson, R-East Grand Forks, said he wishes Walz’s budget included permanent tax cuts, rather than one-time checks.
“What we really need to be doing is making sure that taxpayers across the state have a lower burden and have an incentive to be here and pay those taxes,” Johnson said. “I think broader relief through tax cuts is a way that people are going to be seeing that relief week after week, month after month.”
Johnson and Demuth, House minority leader, said they are happy to work with the governor to move his budget forward as long as it doesn’t increase taxes and doesn’t create more bureaucracy.
“It will be our job in the coming months to expose these controversial spending and divisive policies, so Minnesotans know what they are really getting with this ‘One ‘Extreme’ Minnesota’ budget,” Johnson and Demuth said in a joint statement.
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