Capitol Comments: Historic surplus highlights need for immediate tax relief, better budget planning

Published 8:45 pm Friday, March 4, 2022

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Capitol Comments by Peggy Bennett

This week, Minnesota’s economic experts painted another rosy picture for the state’s economic outlook, finding a budget surplus improvement of $1.507 billion for the current cycle. The projected surplus now stands at $9.253 billion for fiscal year 2022-23.

Peggy Bennett

This mammoth surplus is good news, but it’s also clear evidence that our state is taking way too much money out of the pockets of Minnesotans. 

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This is not an indicator that we need to grow more government by creating new permanent spending programs. We need to implement strategies that will provide long-term stability for our state budget so that we don’t have so much year-to-year volatility with extreme swings from huge surpluses to harmful deficits. Our budget should create a balance between respecting taxpayers and family budgets while smartly funding core government responsibilities like education, long-term care, and roads and bridges. 

Minnesota is among the highest taxed states in the nation. Iowa is now cutting its income tax rates to 3.9% with a flat tax phased in by 2026. We don’t necessarily need to do the same thing, but we do need to adjust our taxation policies to remain competitive with our neighboring states. This is especially important for border communities like ours that often lose employers across state lines due to a more friendly economic climate.

While this record surplus proves we need to make changes to our future budgeting policies, in the short term we now have $9.25 billion that needs to be allocated in some fashion.

First and foremost, we need to return this overpayment to hardworking Minnesotans in the form of tax reductions. Eliminating the state tax on senior citizens’ Social Security benefits is the first idea that comes to mind. Many of our elders are on fixed incomes and rely on their Social Security checks as their sole form of income.

At a time when excessively high inflation (sadly much of which is government caused) is driving unaffordable price increases for groceries, gasoline, energy and other basic life needs, our senior citizens deserve to keep every nickel they’ve earned. Minnesota is one of only a handful of states that continues this unfair taxation. With a $9 billion surplus we can finally end this nonsensical practice.

Our local employers — the very ones who put paychecks into people’s pockets — are also facing a tax increase of 15% or more in two weeks if the state fails to use surplus funds to refill Minnesota’s Unemployment Insurance Trust Fund. The state promised them they would not be penalized for having to lay off employees during Gov. Walz’s forced business shutdowns. The state needs to fulfill that promise.   

Then there is income tax relief for the low-to-middle class. These are the people who are most impacted by the cost-of-living increases that are soaring under the Biden and Walz administrations. Of all Minnesotans, these people truly need to keep more of what they earn to provide for their families.

Gov. Walz has suggested issuing one-time checks using a small portion of the surplus funds, but I believe this is the wrong approach. While that check might look nice the day it arrives, we are now in a position to allow you to keep more of your money permanently. I want you to have more of your money over the rest of your life, not just one day of it.

We also should look at using the surplus to target relief on items that will reduce local taxes and fees — think one-time expenses that can be paid for with surplus cash. Road and bridge improvements are an example, and wastewater treatment facility construction is another. 

MPCA regulations have caused the Albert Lea wastewater treatment plant project costs to skyrocket to $30 million over its original cost. Without state assistance, Albert Lea residents’ water bills will likely triple or quadruple at a time when they’re already paying more for literally everything else. This isn’t fair to local governments or their citizens. With a mammoth surplus, the state is clearly in a position to help.

One thing is clear: we should not spend on new programs that will force the state to have even greater financial implications for the future. This is especially true when we have current core government obligations that are underfunded including nursing homes, in-home care, and other programs that care for our most vulnerable members of society. These should be smartly funded as well.  As always, we should continually reevaluate all current programs to make sure we are spending taxpayer dollars on things that are actually working.

Smart spending, smart tax relief, and smarter budgeting are what I believe is needed at the Capitol these days. But how do you feel? Let me know at or 651-296-8216.

Peggy Bennett, R-Albert Lea, is the District 27A representative.