Tax Relief

Minnesota sees $ 2.83 billion from the American Rescue Act, reinvigorating the tax break debate

Department officials released a draft of the US $ 1.9 trillion bailout bill, as well as more detailed guidelines on how states, counties, local governments, and other agencies could use aid. And they said the first part of the funding will be sent out this week.

The guidelines come when state lawmakers debate the state’s next biennial budget. The final day of the Minnesota 2021 legislature is slated for next week. Legislators and the governor have not yet announced spending targets. Some of the progress that budget committees can make in setting the top priorities for the state’s roughly $ 52 billion proposal has stalled.

Legislators could work overtime if they can’t reach an agreement by May 17th. However, you have a tough deadline of June 30th to approve a budget or risk a state government shutdown.

News of the additional funding and exemptions for previous COVID-19 benefit payments spurred calls to prioritize tax breaks for entrepreneurs who have made federal paycheck protection program loans and Minnesotans unemployed, drawing unemployment insurance benefits. The federal guidelines made it clear that the funds could be used to waive state income taxes for the grants.

Senate and House leaders have so far disagreed on how much federal aid funding should be cut. And they have split over whether the state should impose new income taxes on top earners that could fund other programs like schools, health care or employee benefits.

Senate Majority Leader Paul Gazelka, R-East Gull Lake, said Monday the Capitol Democratic leaders had “run out of excuses to delay the passage of PPP and UI tax compliance.”

“The tax deadline ends on Monday,” Gazelka said in a press release. “If the house is PPP and UI compliant, Minnesotans will get the clarity they need today.”

Gazelka said the additional funding should take away talks about tax hikes in Minnesota.

House Democratic leaders said the funding should help the state fund schools, health programs, and other priorities. And they urged Senate Republicans not to make funding dependent on other policy proposals.

“We can pass federal tax compliance, we can support our hospitals and frontline workers, we can fund our schools, and we can critically pass police reform and accountability laws,” said Ryan Winkler, House Majority Leader, D-Golden Valley. A press release said: “But we can’t get anywhere if extremist Republicans try to shut down state parks or cut school funding to pursue a right-wing agenda that has nothing to do with the lives or livelihoods of Minnesotans.”

Governor Tim Walz told reporters Monday that the federal aid funding was “huge,” but didn’t say the funds would change the conversation about potential tax hikes. Walz said budget negotiations resumed over the weekend and continued on Monday.

Follow Dana Ferguson on Twitter @bydanaferguson, call 651-290-0707, or email

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