Gov. Tim Walz proposes 20-cent per gallon gas tax hike
ST. PAUL, Minn. (FOX 9) - Gov. Tim Walz is proposing to increase Minnesota’s gas tax by 20 cents per gallon to pay for road and bridge projects amid a flurry of new spending plans in the Democratic governor’s first budget.
Under Walz’s budget proposal, the state’s gas tax would increase to 48.6 cents from 28.6 cents, a 70 percent jump. That would make Minnesota’s tax the fourth-highest in the U.S., behind only Pennsylvania, California and Washington.
“What Minnesotans do know is if we continue to do the haphazard approaches or just assume that the budget and economy is going to be great, we’re going to fall further behind,” Walz told reporters after presenting his budget. “We are going to have other catastrophes, whether it be bridges, roads or people who are stuck every single day in unacceptable gridlock.”
On Tuesday, Walz unveiled his $49.5 billion, two-year spending plan that will dominate conversation at the state Capitol over the next three months. His proposal faces an uncertain future in the divided state Legislature, and Republicans who control the Senate have vowed to fight any tax increase.
They said Walz’s proposals would make Minnesota a cold-weather version of high-tax California.
“This will make Minnesota absolutely uncompetitive. This is not ‘One Minnesota.’ This is ‘One Expensive Minnesota,’” said House Minority Leader Kurt Daudt, a play on the slogan that Walz has used since his 2018 campaign.
The gas tax increase would raise $6.5 billion over 10 years. The 20-cent hike is scheduled to be phased in over two years, and the tax rate would then be tied to inflation. The gas tax has not been increased since 2012, state records indicate.
Walz is also seeking four other fee or tax increases on drivers that will raise a combined $4.5 billion over 10 years, including:
• Increasing the base vehicle registration fee from $10 to $45
• Increasing the vehicle registration tax from 1.25 percent to 1.5 percent
• Changing the vehicle depreciation schedule
• Increasing the sales tax on car purchases from 6.5 percent to 6.875 percent
In addition, Walz’s budget calls for a 0.125 percent state sales tax in the seven-county Metro area to expand the regional bus and transit system, including new bus rapid transit lines.
Walz said his 2018 election victory had given him a clear mandate to push through the tax increases, despite a divided state Legislature.
“I say this not out of a position of arrogance but a position of factually: I received 25 percent more votes than anybody in the history of the state who ran for governor,” Walz said. “I ran for governor talking about raising the gas tax.”
Now the negotiations begin. Asked if Walz had boxed legislative Republicans into a tough spot by starting the negotiations with such a high gas tax increase, GOP leaders said they had no plans to meet halfway.
“I think he’s going to be disappointed, because it’s not something we’re just going to move to the middle on,” Senate Majority Leader Paul Gazelka said.
Walz and GOP lawmakers are also on a collision course over a tax on medical providers and a plan to fund $1.27 billion in building projects with debt.
The 2 percent medical provider tax is scheduled to end this year under a deal approved by Republicans and former Gov. Mark Dayton, a Democrat. But allowing it to expire would cost the state an estimated $1 billion by 2023, and Walz said the state cannot afford its health care programs without it.
Republicans say reinstating the tax is a “dead issue” to them.
Among Walz’s other budget proposals:
• Expand the state’s working family tax credit, a move Walz expects will save 46,700 households an average of $227.
• Creating a public option so more Minnesotans can buy into state-run health insurance under a program called ONECare Minnesota.
• Increase K-12 education funding by $189 per student in the first year of the biennium and by $130 in the second year.
• Spend $70 million on a broadband grant program so all Minnesota households will have high-speed internet access by 2022.
Numerous interest groups praised the governor’s budget in emailed statements.
“I’m not sure if there’s anything the governor did say no to,” Gazelka said.
When a reporter asked Walz if he had cut any state programs in his budget, the governor did not name one.
“I think there are some programs that did not receive an inflationary increase, so that will be a decrease (for) them, an automatic decrease in their buying power,” Walz said.