Gov. Tim Walz proposed sending $2 billion directly to taxpayers in a supplemental budget unveiled last week: $500 to single filers and $1,000 to joint filers. If authorised by the Legislature, the payments could be distributed to 2.7 million Minnesotans as early as this summer, according to Walz.
Another priority that the Star Tribune Editorial Board firmly supports is the $2.7 billion total replenishment of the Unemployment Insurance Trust Fund (UITF), as well as around $1 billion in bonuses to an expanded pool of frontline workers who were unable to work remotely during the pandemic.
Walz's overall proposed budget also includes $300 million over three years for local towns' public safety needs, such as police recruiting, monies to strengthen 911 dispatch systems, body cams, or whatever other local concerns demand. The average city would receive $240,000 in assistance.
There's more, but these are the most important areas that need to be funded.
Republicans, on the other hand, regard the state's substantial surplus as a chance to offer lasting income tax cuts and a complete exemption for Social Security income from taxation. Cutting taxes at the bottom, as proposed by Senate Republicans, would benefit all employees, but it could jeopardise the state's budget in the years ahead.
The state's first-tier income tax band would be reduced from 5.35 percent to 2.8 percent as a result of the tax drop. They calculated that joint filers with a combined income of $100,000 would save around $1,000. A $37,000 tax filer would save roughly $500 per year, or around $10 per week.
The difference is that those cuts would continue year after year, regardless of whether or not the state could afford them.
These permanent savings must be balanced against a still uneven pandemic recovery, which has been hampered by inflation, which is now above 8% — the highest in 40 years — and a war in Ukraine that could presage a larger conflict. The likelihood of another recession has increased.
This state wasn't too long ago stuck in anticipated deficits that lasted for years until taxes were boosted in 2013. When it comes to decreasing rates, extreme caution is required. Yes, the state has a responsibility not to willfully overtax, but it also has a responsibility to assure continuity in critical services like health care and education, which account for a big portion of the state's budget. Cuts there have a direct impact on Minnesotans who are most vulnerable.
Consider the following: Melissa Lam Young, assistant commissioner of Minnesota Management and Budget, acknowledged to an editorial writer that $4.1 billion is non-recurring, accounting for over half of the entire predicted surplus.
Senate Republicans, like Walz, support complete restoration of the unemployment fund, but would cap frontline worker bonuses at $250 million, noting a deal struck last year when the predicted surplus was nothing like as substantial as it is now.
That's simply not justifiable when they propose exempting firms from any increases in UI fees, even those huge corporations that performed pretty well during the pandemic. Similarly, the DFL-controlled House would cap UI money at a little more than $1 billion, the same amount as is granted to frontline workers. That appears to be an imposed measure of equality that may unnecessarily harm small and midsize enterprises, as well as their employees.
Permanent vs. one-time tax relief and spending are recurring debates. This Legislature, like previous ones, will not be able to resolve them.
Instead, the remaining months of the session should be spent focusing on common ground – and there is enough of it. In these time of rising energy and food prices, tax relief would be nice. What about one-time payments and a more modest long-term tax reduction? In just three years, cutting the first layer to 2.8 percent would drain $8.5 billion from state coffers. That's a huge commitment that would limit the state's ability to deal with other pressing issues, such as public safety.
And there's a lot to be done on that front, all of which is expensive. Approximately 9,000 officers in the state do not have body cameras. Walz claims he has spent months meeting with mayors, police officers, firefighters, and activists around the state. He informed an editorial writer, "There is no one-size-fits-all." "Brooklyn Park requires funds for police officers. Eagan wants to work with mental health facilities more. The Duluth Police Department requires new equipment. St. Louis Park wants all of its police calls to go via 911 so that it can figure out what needs to be handled by an officer and what needs to be handled by a mental health professional. That is an experiment that should be funded." Republicans want to start working on plans to improve law enforcement recruitment and retention across the state.