Gov. Walz won't rule out tax hikes on businesses, alarming Republicans

Gov. Tim Walz isn’t ruling out tax increases on businesses to pay for major new initiatives like broadband expansion, alarming one key Senate Republican.

Walz is beginning to roll out proposals for his first state budget, starting this week with a pledge to city officials from greater Minnesota that he’ll seek $30 million a year in state aid to local government – a level not seen since 2002. He has said he’ll seek a “moonshot-type” approach to improving rural broadband access and a “transformational” plan to improve the state’s infrastructure.

Walz also hinted at plans to seek an income tax cut for lower- and middle-income people. But he did not close the door when a reporter asked whether businesses would pay a bigger share.

“I think we need to be more thoughtful on how we’re doing things,” Walz said. “I will bring you a budget that is fiscally sound and also transformational in some areas. And I think we’re making the case that some of these investments we’re going to make in the long run are going to add to our revenue, they’re going to reduce our costs.”

Walz has long said he’ll seek a gas tax increase to pay for road improvements. But any tax hike – whether on gasoline or on businesses – will hit an obstacle in the Republican-controlled Senate.

“A tax increase on anybody is a tax increase on everybody, because those tax increases are felt across the board,” said Sen. Roger Chamberlain, R-Lino Lakes and chairman of the Senate Taxes committee.

Two of Walz’s proposals – increasing state aid for local government projects and improving broadband access – could appeal to Republicans because of their impact on greater Minnesota. But Chamberlain said Walz would not get all of the new initiatives he’s seeking.

“We spend a lot of money and they still say we have so many problems,” Chamberlain said. “There are priorities out there, but it’s hard to see how they can fund any new initiatives without increasing taxes.”

Meanwhile, Walz appears to be planning an income tax cut for some Minnesotans, telling reporters this week that individual taxpayers have not seen a decrease since 2000.

“I’m going to leave that one to wait and see, but I think you may be very surprised on this piece,” Walz told reporters. “I don’t deny that a lot of middle class families, when you’re talking about (tax cuts), need to see some relief somehow. That’s the part we’re working on now – how do we make that work so they’re much more targeted?”

He said many lower-income people did not see a benefit from tax changes approved in 2017 by Congress and President Donald Trump.

In an interview after the governor’s comments, House Speaker Melissa Hortman said businesses did benefit from those same federal changes.

“We definitely should not see Minnesota businesses expecting a second scoop of tax cuts from the state of Minnesota,” said Hortman, DFL-Brooklyn Park. “Working Minnesotans who didn’t get that kind of beneficial treatment from the federal government should see Minnesota looking to even out the score when we do tax conformity here.”

Walz’s budget is due Feb. 19. The governor told reporters this week that he would be announcing some elements of the spending plan before then.