Our friends at the Cato Institute issued a Fiscal Policy report card on America’s governors in 2024.
This report grades governors on their fiscal policies from a limited‐government perspective. Governors receiving an A are those who have cut taxes and spending the most, whereas governors receiving an F have increased taxes and spending the most. Any guess where Gov. Tim Walz ranks?
Check out Cato’s analysis of Walz’s leadership:
Tim Walz is a former member of the US House of Representatives and served in the Army National Guard. He has overseen substantial spending increases and pushed many tax hikes. Minnesota’s general fund budget increased from $51.9 billion in the 2022–2023 biennium to $70.5 billion in the 2024–2025 biennium, a 36 percent increase.115
In 2019, Walz’s budget would have added “$2 billion more in new spending and taxes would increase by $1.3 billion to pay for it, with the rest of the money coming from an existing surplus.”116 But he compromised with the legislature, and the final tax increase was about $330 million annually. Walz also pushed for higher gas taxes and higher vehicle fees to raise about $1 billion annually for transportation, but those increases were rejected.
Walz pushed for more tax hikes in 2021. He proposed adding a new individual income tax rate of 10.85 percent above the current top rate of 9.85 percent, a surtax on capital gains and dividends, and a hike to the corporate tax rate from 9.8 percent to 11.25 percent. The proposals—which would have raised about $1.6 billion annually—were rejected by the legislature.
In 2022, Walz said, “Cutting taxes for the wealthiest amongst us will not guarantee opportunities in Minnesota for the wider variety of folks, and it certainly won’t grow our economy from the middle out.”117 But Minnesota’s high tax rates are undermining the economy and driving away wealthy people, who include highly skilled job-creating entrepreneurs. IRS data show that the state loses about 10 households earning more than $200,000 for every 6 that it gains.118
In 2023, Democrats took control of the legislature and Walz pushed ahead with permanent tax hikes on businesses and high earners, while handing out low-income credits and one-time rebates totaling about $1 billion.119 In signing HF 1938, Walz raised taxes on businesses with foreign income, reduced the standard deduction for high earners, and imposed a new tax on the investment income.
Walz hit the middle class with HF 2887, which raised taxes and fees on vehicles and transportation. The increases included indexing the gas tax for inflation, increasing vehicle registration taxes, raising fees on deliveries, and raising sales taxes in the Twin Cities area.120
The governor hit the middle class again in 2023 with a massive tax hike to pay for a new mandatory paid family leave program. The legislation imposed a 0.7 percent tax on wages beginning in 2026 to fund the program benefits, but then new legislation in 2024 increased the tax rate to 0.88 percent of wages. An accounting analysis of the plan found that the tax will raise $1.2 billion in the first year of operation and rising amounts after that.121
Cold northern states such as Minnesota that are suffering from out-migration need to adopt taxpayer-friendly policies to stem the population outflow. Minnesota ranks 44th on the Tax Foundation’s state business tax climate index.122 That state will likely continue losing business investment and high earners to warmer and lower-tax states until it adopts a leaner government and reduced tax rates.
