ST. PAUL – House Democrats blocked a last-ditch Republican effort Monday to vote on bipartisan Senate legislation that could have prevented a tax increase from taking place despite a historic state surplus.
State Rep. Lisa Demuth, R-Cold Spring, said the issue centers on the state’s unemployment insurance trust fund that was depleted with more people out of work during the pandemic. The federal government provided funding to the state to keep the program afloat and now that debt of more than $1 billion is due.
“This tax increase was completely avoidable and it concerns me the majority does not seem to understand the ramifications of failing to fix this issue by March 15,” Demuth said. “The excuses we heard on the House floor are going to become rather transparent when people realize the House majority raised our taxes at a time the state is sitting on around $10 billion in excess revenue.”
Gov. Tim Walz, House Republicans, Senate Republicans, and most Senate Democrats support passing a clean bill to fully replenish the UI funds. The Senate one month ago approved by a veto-proof majority legislation to do so.
But House Democrats continued to withhold that bill through the March 15 deadline. Their own UI bill, which the Minnesota Department of Employment and Economic Development testified would result in six years of tax increases on businesses, has been stagnant since early February.
House Republicans made a move to declare urgency on the matter Monday to take up the Senate bill for a vote but, for the second time in the past week, House Democrats blocked the effort.
Now, a tax increase is set to take place to pay the state’s federal debt despite the fact Minnesota has a surplus of around $10 billion.
Demuth said members of the House majority continue to downplay the impacts of their inaction on this issue, but said real-life reports indicate the tax increases could be significant. One recent article quotes Greater Minnesota employers saying they face tax increases in the tens of thousands of dollars next year. A 130% increase in one reported case translates to a $21,000 spike.
“While this tax formally would be imposed on employers, we’d all feel it one way or another with costs being passed on to consumers,” Demuth said. “This, at a time when the state has historic levels of surplus tax revenue and people already are seeing price increases at 40-year highs.”
DEED also has raised significant concerns about the consequences of not enacting UI legislation by March 15. DEED Commissioner Steve Grove recently told members of the House workforce committee Monday that time is critical. “As of (Tuesday) this gets a lot harder to unwind, and time is of the essence on this piece,” Grove said.
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