House DFL ditches Walz checks in favor of refundable child tax credit

House DFL and Senate GOP lawmakers appear to have killed a plan from Gov. Tim Walz to give Minnesotans direct payments of up to $1,000.

On Monday, the two legislative caucuses published their competing tax plans and neither contains the so-called “Walz checks,” which the Democratic-Farmer-Labor governor had proposed recently. Direct payments to Minnesotans would have cost $2 billion of the state’s projected $9.25 billion budget surplus.

Instead, House Democratic lawmakers have proposed a refundable child tax credit of $325 for each child 16 or younger for single parents earning up to $70,000 and married parents up to $140,000.

If passed into law, the tax credits will apply to 2021, so Minnesota taxpayers will receive the money this year rather than having to wait until filing their taxes next year.  The House DFL child tax rebate would cost $308 million, a fraction of Walz’s plan. 

“We’re going to do something that is targeted and significant to really make a difference,” said House Taxes Committee chair Paul Marquart, DFL-Dilworth. 

The decision by members of his own party to scrap a key agenda item in an election year deals a major blow to the governor. Asked for comment, a Walz spokeswoman offered a cordial statement on the House tax plan. 

“The governor appreciates the House plan to provide tax cuts to those who need it most, without giving money to the top 1%,” Walz spokeswoman Claire Lancaster said in a statement. “He continues to believe direct payments to all working families are one of the best ways to help millions of Minnesotans fight inflation and afford the things they need.”

House Speaker Melissa Hortman, DFL-Brooklyn Park, has previously said she preferred a refundable tax credit over issuing direct payments to Minnesotans as the governor wanted.

Senate GOP lawmakers have criticized Walz’s plan as an election year gimmick and instead have proposed permanently lowering tax rates and 100% exemption from state taxes on social security income. 

Both chambers will be aiming to advance their respective tax plans in the coming days, but the stark differences in priorities will require compromise if the Legislature is to approve any tax plan before lawmakers adjourn the session next month.