ST. PAUL — President Donald Trump signed into law the on July 4, and experts in Minnesota are standing ready for the wide-ranging ripple effects to hit the state and its local economy.
Tax cuts and business impacts
Much of Trump’s 1,000-page bill focuses on tax reform. Among the provisions are extensions of the 2017 Tax Cuts and Jobs Act (TCJA), energy tax repeals and tax changes for research and development. A study from the Institute on Taxation and Economic policy said that the tax proposals will deliver tax cuts for all Minnesotans, but the degree of relief varies across income brackets.
ADVERTISEMENT
Minnesotans in the bottom 20% of earners — those making less than $36,000 a year — will receive an average tax cut of $240 in 2026, while those in the top 4% — earning between $375,100 and $927,700 — will see an average cut of $19,530, from the Institute on Taxation and Economic Policy. The top 1%, incomes over $927,700, will receive an average tax cut of $52,370, according to the estimates.
One of the provisions for businesses includes making the 21% corporate tax rate from the 2017 TCJA permanent. Doug Loon, President and CEO of the Minnesota Chamber of Commerce, said this is one example of tax reform that will be positive for Minnesota businesses.
"H.R. 1 delivers welcome tax stability and predictability for Minnesota businesses of all sizes and industries across the entire state,” Loon said. “By making the 2017 TCJA tax cuts permanent, it helps businesses avoid what would have been automatic tax increases which was a necessity for the many Minnesota businesses that pay taxes through the individual income tax system.”
The bill also includes research and development (R&D) incentives by reversing the TCJA’s requirement for businesses to pay off R&D expenses over five years to expense R&D costs in the year incurred.
“The bill’s permanent reforms for immediate expending for capital investment and R&D will further encourage innovation, expansion, and long-term investment, which should provide broad benefits to Minnesota’s economy,” Loon said. “Our state thrives on innovation and these provisions will be very beneficial.”
SNAP and Medicaid cuts
The federal budget revenue lost through tax cuts will, in part, be made up by cuts to SNAP and Medicaid, which are poised to undergo changes to individual eligibility and work requirements.
Sarah Moberg, interim CEO for Second Harvest Heartland, said that the SNAP changes will drive more people to emergency food relief like food shelves and food banks. 2024 marked an all time high for food banks in the state , according to Food Group Minnesota, a nonprofit and research organization. Moberg said the bill could put the food relief industry in Minnesota on an “unsustainable” path.
ADVERTISEMENT
“We hear often that food shelves are at capacity, that they're having a hard time meeting the need that exists today,” Moberg said. “We believe that we will move from a hunger crisis to a hunger catastrophe, because SNAP is one of the most powerful, efficient hunger-fighting tools we have, and when that gets pulled back, we simply don't have the infrastructure to fill that void.”
According to Second Harvest Heartland, the bill's cuts are estimated to eliminate SNAP benefits for 450,000 Minnesotans — including 175,000 children and 75,000 seniors — and 48 million meals annually in Minnesota alone.
Trump and Republicans alike have said the bill's SNAP and Medicaid cuts aim to . The rate of improper payments through Medicaid is roughly 5% nationally and approximately , according to the Department of Human Services. The rate of improper payments through SNAP is 11% nationally and 9% in Minnesota,
At a House Fraud committee hearing on Tuesday, July 8, Rep. Isaac Schultz, R-Elmdale Township, said the idea of Trump's bill is to ensure the programs are reserved for Americans most in need of assistance.
“At the end of the day here … what Republicans are championing is the idea that there’s a dignity of work, and if you’re an able-bodied adult, that you should be contributing to our economy … and the bill that just passed in Washington is all about ensuring that able-bodied adults — people who look just like me and many of us around this table — that they’re contributing to our society,” Schultz said. “So we need to take a look at Minnesota.”
Medicaid is set to undergo similar changes as SNAP, including an 80-hour monthly work requirement. Roughly could lose Medicaid as a result of the adjustments, according to the Kaiser Family Foundation. a net cost of $500 million annually to the state in lost federal funding.
Matt Freeman, with the Association of Minnesota Counties, said at the same House Fraud hearing on Tuesday that the federal changes to Medicaid could put a strain on counties both in terms of workload and cost burdens.
ADVERTISEMENT
“We're expecting significant cost impacts and workload impacts,” Freeman said. “We do know in the bill, it includes additional verifications, particularly for Medicaid expansion populations, which will be more work for counties, and additional challenges on our existing technology system … that don't inherently or aren't easily adjusted to incorporate new changes from the federal level. So we're expecting property tax burdens to counties, increased workload for the folks that are currently working on eligibility.”
Energy reforms and clean energy rollbacks
The 'Big Beautiful Bill' also rolls back clean energy tax credits from the Inflation Reduction Act (IRA), including electric vehicle incentives and clean energy production credits.
Megan Mahajan, senior modeling and analysis manager with Energy Innovation, a non-partisan energy and climate policy think tank, said that the impacts of the reduced tax credits will be different in clean energy states like Minnesota, where there is a goal to have carbon-free electricity by 2040.
“We have found consistently through our research that states that enact clean energy policies requiring a certain share of electricity to come from clean sources and hopefully save consumers money, just because wind and solar are some of the cheapest forms of energy today and they don't have fuel costs associated with them,” Mahajan said.
Wholesale electricity prices in Minnesota are projected to rise by 31% by 2030 and as much as 340% by 2035, according to Energy Innovation, which said utility rates for residential, commercial and industrial customers would increase by 25-42% as a result. The organization also estimated that average household energy bills could go up by $110 per year by 2030, and by $410 per year by 2035.
Mahajan said that in Minnesota, where clean energy has been incentivized, the loss of the tax credits from the federal government could affect the economy in the long term with the loss of new projects and jobs.
The Trust Project
