Minnesotans are the fifth highest taxed people in the country. Although the state’s taxpayers historically have viewed their tax burden as supporting the public services they value, Minnesotans are increasingly fed up with the ever-increasing taxes they pay, and the state’s high taxes are a serious weight on job and wage growth in the state and a huge burden on Minnesota’s families.

Minnesotans deserve tax relief in the individual tax code, the business tax code, and the sales tax code. The permanent tax relief we propose is nearly $9 billion in total and is described in detail below.

Tax Relief in the Individual Tax Code

Minnesotans of all income levels deserve tax relief. The state should deliver substantial relief for individual taxpayers and families by eliminating the lowest tax bracket of 5.35%. This would mean that all income in Minnesota up to approximately $40,000 for individuals and $50,000 for married couples would be tax free, delivering permanent tax relief of up to $2000 – $2500. In total this common-sense step would deliver tax relief to Minnesotans of over $4 billion annually.

Tax Relief in the Business Tax Code

Minnesota has the highest business tax rates in the country, taxing business income at 9.80%. Minnesota’s high tax rates lead businesses of all sizes to build and grow their businesses in states other than Minnesota.

To incentivize business growth and investment in Minnesota, the state should reduce business rates from 9.80% to 8.00%. This would move Minnesota out of the top ten states for businesses taxes, offering more economic opportunity for businesses to hire and employees to be hired and see their wages grow.

In total these tax reductions equal $420 million annually, a critical investment to drive job and wage growth in Minnesota into the future.

Targeted Sales Tax Relief

The cost of raising a family in Minnesota is immense and growing. The state should respond to these challenges with two targeted changes to its sales tax regime:

1. Existing tax exclusions for baby products should be substantially expanded to include additional products like baby wipes, cribs and bassinets, changing tables, strollers, car seats, and baby swings.
2. The state should exempt school supplies from sales tax.

In total, these changes to Minnesota’s sales tax regime would save Minnesota families millions in taxes, another critical investment in Minnesota’s future.

The growth of the Minnesota government is unsustainable. In the 2023 legislative session, state government grew by nearly 40%.  Looking back further, since 2010 the Minnesota general fund biennium budget has grown from $29.9 billion to $69.5 billion, or an increase of over 130%. Over that period, the Minnesota economy has grown by just 22%.

These trends cannot continue indefinitely. Either the state will have to increase taxes massively–something that Minnesotans strongly oppose–or the state will have to get control of its spending and learn to again live within its means.

To set Minnesota on a new fiscal course, the state should pass a state constitutional amendment to cap spending increases at a rate of growth based on inflation and population changes. Over that cap, any revenue over would be required to be returned to taxpayers in the form of (i) property tax rebates, or (ii) temporary or permanent tax rate reductions. Legislators would be permitted to exceed the cap for one biennium only by a vote of 60% or more in each body, which is the same as the threshold for bonding in the state.

This constitutional amendment would help ensure that we will never again allow for historic surpluses to be frivolously spent rather than given back to families and job creators without large, and likely bi-partisan, majorities approving such a step. And it would mean that spending growth in the future will be more thoughtful and measured than the unsustainable spending we have seen in recent years. It is the fundamental reform Minnesota needs to again have a fiscally responsible government.

On regulatory matters, Minnesotans believe in striking a balance. On the one hand, we want to protect our people and our natural resources. On the other hand, unnecessary and overly burdensome government red tape hinders job growth, and we want to ensure that regulation makes sense and does not overly-burden our state’s job creators.

In recent years, that balance has been lost. Minnesota has over 98,000 distinct regulations and nearly 5.7 million words of administrative code. The state is in desperate need of regulatory reform.

Minnesota should undertake a series of critical regulatory reforms to ensure that regulation in Minnesota makes sense again.

Correct Regulatory Overreach

Minnesota should force legislative review of expensive agency rules to better protect growth and prevent bureaucratic overreach by undertaking three critical reforms:

Legislative Review – Require the Legislative Budget Office (LBO) to determine whether the cumulative effect on the economy of an agency regulation exceeds $50,000,000 within the first 12 months of its adoption. For regulations that exceed the threshold, the Legislature should be required to enact a law in order to continue the regulation. Absent such legislative authorization, the law should be automatically repealed after the next session following the LBO’s determination (whereupon the applicable agency is precluded from re-implementing that regulation going forward absent further legislative action).

Burdensome Regulations on Small Business – Allow small businesses and local governments to request a determination from the LBO on whether a regulation exceeds the existing $25,000 threshold and present the determination as evidence for exemption or modification to the agency or administrative law judge.

Understanding the Burdens of Red Tape

Minnesota legislators and Minnesotans should be informed of the consequences of legislation on Minnesota businesses and workforce. Currently, the Legislature’s understanding of how proposals impact businesses is limited to committee discussions that revolve largely around selective data and anecdotes. The state should correct this by requiring the LBO to prepare business impact notes for legislation that imposes regulations and other types of unfunded mandates on business. Like Fiscal Notes that examine the financial impact on agencies and the state budget, business impact notes would provide detailed and clear examples of how proposals would help or harm our economy.

Over the past decade Minnesota has had serious failures in the use of taxpayer funds due to both fraud and negligence. These include the failures of the Southwest Light Rail project, which is currently $1 billion over budget, the Feeding Our Future fraud in which $250 million was stolen by an expansive network of fraudulent actors, and the Department of Human Services’ failures over the past decade in which hundreds of millions of dollars were overpaid, uncollected, or otherwise lost to fraud. Minnesotans deserve better than to have their hard-earned tax dollars treated so carelessly.

Two key steps must be taken to enhance accountability, ensure fiscal sustainability going forward and again allow Minnesotans to have confidence in how their tax dollars are being spent.

Grant Enforcement Power to the Office of the Legislative Auditor

The Minnesota Office of the Legislative Auditor extensively audits state agencies, evaluates public programs, and investigates the misuse of public money, and has proven to be capable in those efforts. Given such existing capabilities and the clear failures elsewhere in Minnesota government to appropriately pursue wrongdoing in connection with the use of public funds, the Legislative Auditor’s office should be expanded to grant the office enforcement authority to bring civil complaints where there has been fraud or maladministration in taxpayer funded programs. 

Enhanced Authority of Minnesota’s County Attorneys to Pursue Fraud

County attorneys in Minnesota have extensive experience in the application of Minnesota statutes to wrongdoing. These important actors in our state’s system should be granted the authority to bring suit related to fraud or maladministration in taxpayer funded programs to ensure justice is done in such cases.