ST. PAUL, Minn. (FOX 9) - The Minnesota Senate overwhelmingly approved nearly $500 million in tax breaks for businesses and workers that got federal relief during the COVID-19 pandemic.
The 55-12 vote sends the bill to the DFL-controlled House, where its future is uncertain. House Democrats and Gov. Tim Walz are pushing to include more funding for summer school in the final package.
The business tax break, which is estimated to cost the state $440 million, is the top priority for Republicans who lead the Senate. It wipes away tax bills for thousands of businesses that received Paycheck Protection Program loans from the federal government.
"We want to get this done now," Senate Majority Leader Paul Gazelka, R-East Gull Lake, said during the debate. "We have to see what kind of package comes together (with the House)."
More than 100,000 Minnesota businesses received $11.3 billion in PPP loans last year, which were forgivable if business owners primarily used them to retain staff during the pandemic-fueled recession. Minnesota treats forgivable loans as income.
The tax break for laid-off workers is not as generous. Under a change approved Thursday, the bill makes 18 percent of 2020 jobless benefits tax-free in Minnesota, a move that is estimated to cost $31 million.
The tax break would be reduced by one-quarter for every dollar of annual income for individuals making more than $75,000 or married couples earning at least $150,000.
Democrats tried unsuccessfully to make the first $10,200 of 2020 benefits tax-free, to mirror a provision in the federal stimulus signed into law by President Joe Biden on Thursday.
"If we're going to do a tax break for businesses, we need to stand up for workers," said state Sen. Jen McEwen, DFL-Duluth.
Walz responded to the bill's passage by criticizing the Senate's priorities during a stop at Armstrong High School in Plymouth.
The governor, a first-term Democrat, is calling on lawmakers to add $150 million in summer school funding to the legislation.
"To rush through and throw a tax cut out there and then say well if there’s a little bit extra left over, then we’ll take care of the schools – I don’t want to do it that way," Walz told reporters. "So I’ve asked them, why don’t you put it together?"
Walz did not commit to signing the bill if it comes to his desk as-is, but that scenario is unlikely because House Democrats are also seeking summer school funding.
State Sen. Ann Rest, a Democrat, had sharp words for her House DFL colleagues during Thursday's debate.
"It is time for the House to stand up and address the people of Minnesota, address our businesses, address the workers, and support the provisions that are in this bill," said Rest, DFL-New Hope. "They can't keep ignoring the actions of the Senate."