ST. PAUL — Less than a month out of a possible government shutdown, Minnesota’s tax bill — one of the last pieces of the state budget — remains in limbo.
Gov. Tim Walz and leaders have said in the weeks following the end of the regular session that the plan is to wait until all budget details are hammered out before calling a special session. The tax bill was one of the few remaining budget bills in dispute over the weekend, so leaders took the bill into their own hands and posted a slimmed-down agreement on Sunday, June 1 — an agreement that may not have enough votes to pass.
ADVERTISEMENT
Rep. Greg Davids, R-Preston, co-chair of the House’s Tax Committee, on Monday said the leadership tax bill is “the worst tax bill (he’s) seen in 33 years.”
“I couldn’t in good conscience vote for it,” he said. “I can’t speak for the Senate, but it sounds to me like there’s a number of senators that have said they’re not supporting it and so it’s not going to pass.”
The tax proposal posted by leadership is a small, 12-page bill that outlines to the state’s current tax provisions.
Some of the larger changes among them include an increase to the state’s cannabis gross reciepts tax from 10% to 15%, repealing the electricty exemption tax for data centers and changing the state’s Research and Development tax credit to include a 17.5% refundability in tax year 2025 and 25% refundability begining in tax year 2026.
Davids said he takes issue with several provisions of the bill, one being the absence of a sustainable aviation fuel tax provision. Another is the data centers tax proposal from leadership, which is anticipated to generate roughly for the state over four years, according to House Fiscal analysts.
Currently, Meta is building a data center in Rosemont while Amazon and Microsoft are He said he would prefer a proposal that he backed from Senate Tax Chair Ann Rest, DFL-New Hope, that would give data centers relief “on the back end” for paying the electricity tax.
“This was taken from us,” Davids said. “So you have a lot of folks that really know nothing about taxes trying to put a tax bill together. That’s the recipe for disaster.”
ADVERTISEMENT
To pass their tax bill, leadership will need Senate Democrat votes, and some have already declared a “no” vote on the bill as it stands.
“I rejected it right off the bat,” Rest on Monday. “As soon as I saw it, I told them I couldn't vote for that and neither could half a dozen other Senate Democrats.”
Several Democrat tax proposals from this session did not make it in the leadership tax bill, including repealing a sales tax exemption for data centers, a social media tax or a new fifth-tier income tax.
Roughly 20 Democrats held a press conference on April 25 to offset potential federal funding cuts to the state, but Speaker of the House Lisa Demuth, R-Cold Spring, has maintained all session that broad tax increases are a “nonstarter” for House Republicans.
Sen. Erin Maye Quade, DFL-Apple Valley, said during the E-12 (early through high school) Education working group on Monday that it’s “harder” to make the $420 million in cuts to education knowing “we don’t have to.”
“We have chosen to continue tax breaks for the wealthiest corporations in the world — not in Minnesota, in the world — your Twitters, your Facebook, Meta, Google, Amazon …,” Maye Quade said. “It was really, really hard to make these cuts, but it’s harder to do it, knowing that we don’t have to, that … it’s a choice we’re making to continue tax breaks for the largest billionaires and their companies in the world, and then cutting special education services for students.”
Davids said Monday that the Minnesota Legislature could opt for not passing a tax bill, if necessary, to finish work.
ADVERTISEMENT
“If there’s no tax bill that passes, that’s a possibility,” he said. “You don’t have to have a tax bill. Then you just go back to old law, which should be much better than what they proposed … we spent five months working on a bipartisan matter, putting some very good tax provisions together, and I really don’t want to walk away from those. I’d rather have … no tax bill than a bad tax bill.”
The Minnesota Legislature must enact a budget by July 1 to avoid a partial government shutdown. Layoff notices were sent on June 1 to government employees warning of the shutdown possibility, and another round of notices will follow on June 9, according to Walz.
The Trust Project
