Governor Tim Walz’s proposals to distribute rebate checks to Minnesotans this year while also raising taxes were met with mixed reaction by several residents who say they’re struggling with inflation and the COVID-19 pandemic.
Several Minnesotans who recently spoke with Sahan Journal voiced support for the rebate checks, saying they could use the extra dollars in the wake of inflation and an economy they feel hasn’t recovered to pre-pandemic levels. But many expressed anxiety about paying more in taxes, even if they support the programs the new taxes would fund.
“Anything that brings back money to the community is helpful,” said Yni Quintero, a single mother in St. Paul who reviews legal documents for work. “But it would be very hard to get a new tax, even though it’s for a good cause, because we already pay a lot in taxes.”
Quintero said she would use the rebate to pay off her student loans and fund her 11-year-old-daughter’s many activities.
Walz, fresh off of a reelection victory last fall, revived a rebate proposal that would give one-time checks to an estimated 2.5 million Minnesotans. Under a proposal he unveiled last week, households with two earners whose combined income is $150,000 a year or less would receive a one-time payment of $2,000, plus an extra $200 for up to three child dependents. Individuals with incomes of $75,000 a year or less would receive a one-time check for $1,000.
But Walz is also proposing several new taxes and fees to fund public transportation and paid family leave.
Ngan Hoang runs Cali Nails on Lake Street in Minneapolis, a salon that her mother started nearly 30 years ago after the family immigrated from Vietnam. Hoang said her sales have not recovered to pre-pandemic levels since COVID-19, and that her business also suffered financially when it sustained property damage during the civil unrest following George Floyd’s murder by Minneapolis police in 2020.
“I can’t even see it returning to the way that it was,” said Hoang, who employs four people.
Hoang said she supports many of the programs Walz wants to fund with new taxes, but she wants to see how they would impact her and her business.
“Obviously I have my home, I have property taxes, and I have taxes for the shop,” Hoang said. “As a small business, I’m kind of suffering.”
Walz is proposing a 1/8 of a cent sales tax in the seven-county Twin Cities metropolitan area. He has said the sales tax, which would equate to an additional 1 cent for every $8 spent, would go toward public transportation costs, including the ongoing Southwest light rail project.
Walz’s most hefty proposal is a payroll tax increase of 0.6 percent to pay for a new statewide paid family leave program. This increase would amount to an added $300 in taxes for someone making $50,000 a year. Employers would pay for the tax, but they could charge employees up to 50 percent of the total cost, said state Department of Employment and Economic Development spokesperson Alicia Cordes-Mayo. That would amount to charging $150 to an employee earning $50,000 a year.
The proposed paid family leave program would allow workers in Minnesota to take up to 12 weeks off for the birth of a child and medical emergencies. A state insurance program would compensate workers for up to 90 percent of their income during the 12 weeks. Walz proposes paying for the first few years of the program with money from a projected surplus of $17.6 billion in the state budget, and beginning the new payroll tax in 2026.
The rebates and tax increases must be approved by the state Legislature, which is currently in session through May. Democrats in the Legislature have yet to explicitly support Walz’s rebates and taxes, but leaders broadly praised his budget requests and are moving forward with a paid family leave bill that’s similar to Walz’s proposal.
Brett Buckner, managing director of OneMN.org, a policy organization that advocates for economic equity, said the rebates make good business sense for entrepreneurs of color in the state. He also said they could help “stabilize the economy.”
“In order for a business to be successful, you have to have disposable income,” Buckner said. “Every little bit counts, not only just because of inflation, but just the challenges that a lot of people are having right now.”
Buckner also supported the paid family leave proposal, but said the burden to pay for it should fall more on corporations and big businesses than workers.
“Those additional dollars from the payroll to make this thing happen is really going to make it better for our kids in the long term,” Bunker said.
Support for rebate checks
Quintero, 42, who qualifies for the $1,000 rebate, said she would use the money to pay her student loans. The St. Paul resident immigrated from Mexico to Minnesota 15 years ago. She spent the next several years in school, first attending English classes and community college, and then eventually enrolling in law school at the University of St. Thomas. Quintero graduated from law school two years ago and is currently preparing for the bar exam.
“It’s a really small amount of money, but it would be very helpful in my house,” she said of the proposed rebate.
Any leftover money, Quintero said, would fund activities for her daughter.
“She likes to play chess, she does jiu-jitsu, she does basketball, she does football,” Quintero said. “And she’s starting to do theater now.”
Dua Thor said the rebate would help pay for the “basic necessities” at his business and home. Thor and his wife, Stacy, run Stacy Produce at the HmongTown Marketplace in St. Paul. Their produce stand sells fresh Asian produce like jackfruit, Shanghai bok choy, and several varieties of ginger—all hard to find or unavailable in mainstream supermarkets.
The worst of COVID-19 may be long over, Thor said, but he said his family business is still suffering “residual effects” from the pandemic. Thor’s household would qualify for the $2,000 rebate.
“It’s still kind of slow,” Thor said, “so anything that would help costs like the utilities would help.”
Thor, his wife, and their four kids have cut back on activities like vacations and going out to eat throughout the pandemic and with inflation and the increase in gas prices.
“If there’s $2,000 extra, maybe we can take a family trip or something like that to take a breather,” Thor said.
Hoang, the nail salon owner, said she would support a rebate check as long as taxpayers like herself aren’t on the hook for paying it back down the line. Walz has said the proposal would cost $4 billion and would come solely from the state’s current $17.6 billion estimated surplus.
Anxieties over proposed tax increases
Much of the proposed metro sales tax increase would pay for extending the Southwest light rail line, which would expand train services from downtown Minneapolis through several West Metro suburbs. The project has been hampered by delays and ballooning costs. Construction began in 2018 with a projected cost of $2 billion and a launch date of 2023. It’s now expected to cost $2.75 billion and open in 2027.
Quintero expressed some skepticism about the light rail project, noting its delays. The proposed payroll tax increase makes her anxious.
Quintero said she spent several years saving money to buy a house. Now a homeowner, she sometimes struggles to pay taxes, especially “ridiculously expensive” property taxes from St. Paul and Ramsey County, she said.
A new payroll tax would be “really hurtful for people because we already have so much taxes to pay,” she said.
“So now adding more is going to be more hurtful from my perspective,” Quintero said.
At the same time, Quintero voiced support for the concept of a statewide paid family leave program.
“United States’ laws about family leave and maternity leave are some of the worst in the world compared to any other country,” she said.
Thor expressed cautious support for an increase in his taxes to pay for a statewide paid family leave program. He noted that most European countries are more progressive on the issue than the United States, and that the United States is wealthy enough to support its own leave program.
“As long as they can show me the proof, that this is the benefit and this is the cost, then yeah,” Thor said.
Thor also expressed support for a sales tax increase to pay for the light rail line, saying it would be good for the environment and his kids’ futures.
Hoang supports the sales tax increase, saying light rail is a good investment. But she had conflicted feelings about an increase in payroll taxes for a paid family leave program.
“When I worked for corporate America, I thought that idea was great, because I was the employee,” she said. “But now that I’m the employer, I guess I will have to wait and see how it will increase my taxes.”
Hoang said a state-funded paid family leave program would be helpful for small businesses like hers that can’t afford to support their own programs. But, she added, tax increases to pay for the program will have to be affordable for small businesses.