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Jun 25, 2025  |  
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Jeff Mordock


NextImg:While other governors were lowering taxes, Walz socked Minnesotans with slew of tax hikes

During Tim Walz’s tenure as Minnesota’s governor, he has approved more than $10 billion in tax hikes, imposing new taxes on everything from retail deliveries to workers’ earnings, overseeing one of the most dramatic shifts towards higher taxes in the country.

Mr. Walz’s big-spending, high-tax policies have led to an anemic economy in Minnesota, which has lagged behind the rest of the nation in economic growth. Average weekly wages in Minnesota rank among the lowest in the country, and population growth has stalled as high-income households flee the state.

The tax-and-spend spree makes Mr. Walz an outlier at a time when governors of both parties are slashing state taxes. It also foreshadows the direction Vice President Kamala Harris — who selected Mr. Walz as her running mate — plans to take this country if she’s elected in November.

Despite coming into office in 2019 with a $17.6 billion budget surplus, Mr. Walz has slapped Minnesota taxpayers with a series of tax increases. The surplus is now spent, even as Mr. Walz has imposed:

— A 0.7% payroll tax on employers, half of which may be passed on to the employee, making it among a handful of states with a payroll tax.

— A 50-cent tax on all retail deliveries in the state over $100 except for food. Colorado is the only other state with a retail delivery tax.

SEE ALSO: Walz oversaw worst pandemic fraud in nation; $250 million stolen from program to feed kids

— An increased motor vehicle sales tax, raising it to 6.875% from 6.5%, among the highest in the country.

— A 1% sales tax in seven counties in the Minneapolis metropolitan area, bringing the sales tax rate in those counties to more than 8% and 9% in Minneapolis. The average sales tax in the U.S. is roughly 6%.

— A 1% surtax on net investments such as capital gains, dividends, rental income, royalty and other investment income that exceeds $1 million a year.

— Increased corporate taxes by targeting a portion of the revenue Minnesota companies generate abroad.

— Limited tax deductions on families with incomes over $220,000 a year.

Those tax increases are just a sliver of the hikes Mr. Walz sought to impose on residents.  He also campaigned for governor in 2018 on the promise of adding a 10-cent per gallon tax on gasoline and proposed increasing the income tax rate for millionaires to 10.85% from 9.85%, which was already one of the highest in the country. Neither measure cleared the legislature.

“When it comes to tax hikes, Walz doesn’t discriminate. He is open to all manner of tax hikes — regular people, businesses and even those who can least afford it,” said Patrick Gleason, vice president of state affairs for Americans for Tax Reform, a conservative think tank.

Mr. Walz has defended the tax hikes, saying they’ve paid for much-needed social programs to help working-class Minnesotans.

For example, the new payroll tax will cover state-funded medical and family leave for workers. The 1% sales tax increase will be divided, with three-quarters of the revenue paying for new transportation projects and one-quarter funding state rental assistance programs. The delivery fee tax will pay for new roads.

“We can cut taxes for the middle class without cutting taxes for massive corporations and the wealthiest people in Minnesota. They don’t need a tax cut,” Mr. Walz said in 2022.

As Mr. Walz doubled down on his push to raise taxes, however, Minnesota’s economy has struggled. Since the COVID-19 economic recovery began in the second quarter of 2020, Minnesota’s economic growth has lagged behind the national average by 5.5 percentage points, according to data from the U.S. Bureau of Economic Analysis.

Since Mr. Walz came into office, the largest employment growth came in the health care and social assistance sector and in government jobs, according to data from the Bureau of Labor Statistics.

In the past year, employment grew by 0.7% in Minnesota, ranking 42nd in the nation. Manufacturing has lost 7,500 jobs over the past year, while professional and business services jobs declined by 22,700.

The higher tax burden has also sent residents fleeing to other states. Between 2019 and 2022, migration to other states is sixth highest for households with more than $200,000 or more in income and eighth among income from all households, according to the most recent IRS data.

Minnesota is ranked eighth in income loss, with refugees headed to zero-income tax states Florida, Texas and South Dakota, which borders Minnesota. South Dakota’s job growth rate has quadrupled since Mr. Walz took over in Minnesota.

“Before Walz came into office, Minnesota had growth ahead of the national average,” said Mr. Gleason. “I would never argue taxes are the only driver, but it’s an important factor and Minnesota is not competitive when states around the country are aggressively reducing tax burdens.”

Increasing the tax burden on Minnesota residents separates Mr. Walz from other governors, who have been cutting taxes since 2021. In the past three years, 28 states have cut individual income tax rates, 15 states have cut corporate tax rates and a handful of states have reduced sales taxes or enacted some form of tax relief, according to data from the Tax Foundation, a nonpartisan research center that collects data about state and federal taxes.

“Under Governor Walz, Minnesota has not hesitated to be an outlier on taxation,” said Jared Walczak, vice president of state projects at the Tax Foundation.”Governor Walz is the rare governor right now who has prioritized tax increases rather than tax cuts. Most governors have signed tax cuts in recent years, while Governor Walz has signed tax increases. He represents the higher tax progressive wing of the Democratic Party.”

For example, Pennsylvania Gov Josh Shapiro, who was also on Ms. Harris’ shortlist for running mate, is trying to accelerate an already scheduled cut in the Keystone State’s corporate tax rate to 4.9% from 9.9%. At an event last month, Mr. Shapiro said that slashing the corporate tax rate is necessary “to grow jobs and create more economic opportunity.”

Ms. Harris has advocated increasing the national corporate tax to 35%, much higher than the 28% level sought by President Biden.  The corporate tax rate was 35% but dropped to 21% in 2018 as part of President Trump’s tax relief package.

Another candidate on Ms. Harris’ shortlist, Kentucky Gov. Andy Beshear, a Democrat, last year signed a tax cut bill advocated by Republicans in his state. He said it would provide relief for residents struggling with inflation. The proposal left Kentucky’s corporate tax rate untouched.

The desire to increase corporate taxes shared by Ms. Harris and Mr. Walz may have been a factor in why she didn’t pick Mr. Shapiro, who was viewed as a heavy favorite for the job. Some, including Republican vice presidential nominee Sen. J.D. Vance of Ohio, have suggested Mr. Shapiro didn’t get the gig because he’s a Jewish Democrat at a time when young progressives have voiced anger at Israel over the war in Gaza.

“Shapiro’s comments would have been used against the Harris campaign and her plan to raise the corporate tax rate to 35%,” Mr. Gleason said. “They would have had a real problem with Shapiro contradicting her so the Harris campaign avoided the headache by going with Walz.”

The Institute on Taxation and Economic Policy, a liberal think tank that works on state and federal tax policy, described Minnesota’s taxes under Mr. Walz as “progressive, but hardly radical.”

“The state has embraced practical, administrable reforms that have lowered taxes for working-class families, reduced child poverty, and addressed the public’s frustrations with the tax treatment of multinational companies and wealthy people,” wrote ITEP Research Director Carl Davis in an analysis.

There are two areas where Mr. Walz lowered taxes. He created a new child credit and added a tax exemption for most Social Security income. However, the exemption had already existed in most states, suggesting Minnesota was catching up to the rest of the country.

The state’s child income tax credit is truly progressive because it phases out at $29,500 for single-income filers and at $35,000 in household income for joint filers. In a two-child household, the tax credit would phase out at $67,000 in household income. That’s well below Minnesota’s median household income of $82,000, meaning it’s only available to low-income households. 

• Jeff Mordock can be reached at jmordock@washingtontimes.com.