Just kidding!
The important thing is he's a former school teacher, football coach and was in the National Guard for several decades*...a great guy. Who cares about policy or result metrics ! That's for pencilnecks.
*Don't read the next article about him running for the hills when called for active duty.
The Minnesota Tax-and-Spend Model
Tim Walz is turning the state into another California and New York.
By The Editorial Board, WSJ
Aug. 9, 2024 5:39 pm ET
We had to chuckle at the liberal commentariat’s portrayal of Tim Walz as a political balance to Kamala Harris. Have they examined his record as Minnesota Governor? On taxes and spending, he has sought to outdo California progressives and is making Illinois look like a model of fiscal discipline.
Ms. Harris is slipstreaming behind the Biden Administration policies and refusing to lay out her own policy agenda. This makes Mr. Walz’s record as Governor over the last six years all the more revealing as a window on the duo’s plans for the country.
***
Minnesota has long boasted the highest taxes in the Midwest, including a top income tax rate (9.85%) that kicks in at $193,240. Only New York and Oregon tax their upper middle class more. Minnesota’s corporate rate (9.8%) is also the nation’s second highest after New Jersey, and the state is among the few to impose a death tax (16%) and statewide business property tax.
Such high taxes fueled population flight during Mr. Walz’s prolonged Covid lockdowns, but the economic damage was mitigated by $21 billion in federal pandemic cash. While Republican Governors such as Iowa’s Kim Reynolds used their budget surpluses to cut taxes, Mr. Walz went on a spending binge and raised taxes even more.
Republican control of the state Senate between 2019 and 2022 restrained Mr. Walz’s ambitions. But after Democrats took full control of the Legislature in 2023, he unleashed his inner Sacramento. Despite a $17.5 billion surplus last spring, he midwifed a large tax increase, which he used to boost transfer payments and create new entitlements.
This includes a 1% surtax on investment income above $1 million and revised corporate tax to capture more global business income. Democrats also established a new family and medical leave entitlement financed by a 0.88 percentage-point payroll tax. These taxes effectively raise Minnesota’s top marginal tax rate on investment income to 10.85% and on wages to 10.73%.
Democrats also effectively increased taxes on folks earning more than $220,650 by phasing out their deductions such as for mortgage interest. Is this Mr. Walz’s threshold for “rich”? Removing distortions in the tax code can reduce economic inefficiencies, but Mr. Walz did the opposite by expanding carve-outs to redistribute income via the code.
These include a $1,750 refundable child tax credit; a dependent care credit worth up to $2,100; a $600 “newborn credit”; and a $1,275 to $2,850 tax credit for “working families.” Add them up and low-income Minnesota households with two children can pocket $8,000 even if they work only a few months a year—not including a credit for rent payments.
Notably, most tax credits phase out for middle-income earners and thus create a disincentive to work more hours or take a higher-paying job. Democrats also exempted most Social Security and some public pension income from tax. This will please government unions but is unlikely to prevent seniors from leaving for states with no income and death taxes.
Raising taxes on the rich wasn’t enough to pay for all these tax subsidies and Mr. Walz’s new entitlements such as free public college. So Democrats are also whacking the middle class, such as with a new 50-cent retail delivery fee and a one percentage-point sales tax increase in the Twin Cities region. St. Paul’s 9.88% sales tax is one of America’s highest.
Minnesota this year ran a budget surplus of $3.7 billion owing to robust corporate and individual income tax collections, but the state faces a $1.5 billion shortfall in the next budget cycle because revenue isn’t expected to keep pace with spending.
That shortfall could grow since the state’s economy is increasingly driven by government spending. Minnesota has added a mere net of 1,600 jobs in private industry over the last year, which includes 30,500 in healthcare and social assistance. It has lost jobs in construction, manufacturing, tech, finance and professional and business services.
Its year-over-year rate of private job growth (0.1%) has been among the lowest in the country and trails its neighbors, including Iowa (1.2%), Wisconsin (1%), South Dakota (0.9%) and North Dakota (0.7%). Florida’s is 2%. Minnesota was the only state in the region whose private GDP excluding agriculture declined in this year’s first quarter (the most recent data).
***
When government raises taxes on job creators, many leave or reduce hiring. As we’ve seen in Illinois, New York and California, the tax-and-spend ratchet reduces the economic growth needed to support bigger welfare states and public-worker benefits. Mr. Walz has increased transfer payments even more than in those states.
This record is the reason Democratic pundits and the progressive left are so pleased with Mr. Walz’s elevation. They know what Ms. Harris’s choice means for the next four years.
Copyright ©2024 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Appeared in the August 10, 2024, print edition as 'The Minnesota Tax-and-Spend Model'.
Comments