Tim Walz’s Tax Policy Record Tim Walz
Minnesota Gov. Tim Walz is Vice President Kamala Harris’s new running mate. His tax policy record could elevate the debate on the campaign trail in 2024. As governor, Walz created Minnesota’s largest state child-tax credit (CTC), reduced taxes on Social Security, but offset some of these tax cuts by various tax increases on high-income households, businesses, and individuals. Additionally, he created a new payroll tax to fund the state’s paid family leave program and enacted a cannabis tax for recreational sales.
Much of Walz’s record aligns with the broad themes, if not specifics, of Harris’s previous positions on tax policy–raising tax revenue from high-income households to fund ambitious policies and using the tax code to directly achieve policy goals.
However, as with any governor, keep in mind that his record in Minnesota will not simply map onto next year’s federal tax debate. Walz’s state enjoyed large budget surpluses over the past few years, while the federal government operates in a notably different fiscal environment.
Further, all of these policies were enacted only after Democrats gained full control of the state legislature in 2022–the state’s Republicans opposed his tax agenda–and we have no idea who will control Congress next year.
But for the next three months, here are five of Walz’s tax policies that could feature prominently in the campaign.
“The best child tax credit in the country,”
Tim WalzTwelve states have enacted or expanded a CTC since the American Rescue Plan temporarily but significantly expanded the federal CTC in 2021, but at $1,750 per child, Minnesota now offers the largest state CTC in the nation. Minnesota’s CTC also makes it more accessible to many families, as its rules on child age and household income are more flexible than those of other states. Minnesota’s CTC, on the other hand, is “fully-refundable” and has no income phase in. As a result, a Minnesota family with an eligible child but little or no income can get the state credit even if they are not eligible for the federal CTC.
Social Security tax cuts: Walz vs. Trump
As part of the tax legislation Walz signed in 2023, Minnesota exempted Social Security income from state tax for single filers earning less than $78,000 and married filers earning less than $100,000.
Meanwhile, Donald Trump recently proposed completely repealing federal income taxes on Social Security income. The Trump proposal had no income eligibility restrictions, and a Tax Policy Center analysis found that biggest benefits would go to middle- and high-income households.
Still, the major difference between the two proposals is the price tag and budget circumstances. Walz’s tax exemption will cost the state between $250 and $300 million per year, or less than 1% of its general revenue. Trump’s proposal, on the other hand, would cost approximately $150 billion per year, or about 3 percent of federal revenues. More importantly, the federal repeal would lower revenues earmarked for the Social Security and Medicare Hospital Insurance trust funds that already face insolvency.
Tax increases on corporations and high-income households
When governors across the country signed tax cuts from 2021 to 2023, most simply used surplus revenue to fund the tax cuts. Minnesota was an exception.
While the legislation Walz signed in 2023 was a net tax cut, it included some offsetting tax increases. The bill reduced the amount of standard deductions or itemized deductions for filers earning over $220,000 (with even tighter restrictions for those earning over $1 million), and created a capital gain surtax. The law also conformed state tax law with federal rules on the global intangible low-taxed income tax (GILTI)–a minimum tax intended to prevent multinational corporations from shifting profits overseas–that amounted to a tax hike on corporations operating in Minnesota.
Republicans strongly criticized these tax increases, and as a result the bill passed on a 34-33 party-line vote in the Senate. But those tax increases also gave Walz the revenue necessary to deliver on his policy priorities for the state CTC and Social Security exemption.
Payroll tax for paid leave
Walz created a payroll tax in Minnesota that will fund the state’s new paid family and medical leave program. The new tax is equal to 0.7 percent of the employee’s wages. Both the employer and the employee are responsible for paying the tax. Minnesota can adjust its tax rate to fund this program, but it cannot exceed 1.2 per cent. The majority of these programs are funded by payroll taxes.
Many Democrats, including Harris, are pushing for similar programs at the federal level, but Republicans generally oppose the taxes that fund them.
Cannabis taxes
Walz signed legislation that legalized cannabis in Minnesota in 2023. In 2025, when sales begin, the state will charge a 10 percent tax on the purchase price. While a majority of Republicans support legalizing cannabis at the federal level the map of states that show where cannabis is illegal and legal still looks like the partisan split in our recent presidential election maps.
