Minnesota Republicans propose largest tax cut in state history

House Speaker Lisa Demuth, R-Cold Spring, said the proposal responds to rising costs facing Minnesotans.

“Right now, Minnesotans are feeling squeezed from every direction – groceries, child care, housing, insurance, energy,” Demuth said. “When you think about it, it’s the basics and they’re just getting more expensive. Families are actually working harder but they’re falling further behind.”

The proposal includes $1 billion in one-time property tax relief, eliminating taxes on tips and overtime, and repealing car tab fees. It also calls for lowering child care costs and directing hundreds of millions of dollars into education through scholarship-granting organizations.

“Many of these proposals have bipartisan support already and can pass this year,” Demuth said. “We’re ready to get to work and we’re calling on our Democrat colleagues to work with us to deliver these solutions to Minnesotans.”

Additional investments proposed in the plan include modernizing county-administered public service IT systems and allocating additional funding for fraud prevention and compliance with federal requirements tied to President Donald Trump’s “Big Beautiful Bill.”

House Republican Floor Leader Harry Niska, R-Ramsey, said the plan would be funded in part by redirecting money from major infrastructure projects he argued are unlikely to move forward, including the Blue Line light rail extension and the proposed Northern Lights Express passenger rail line between the Twin Cities and Duluth.

Republicans framed the proposal as a response to hardship being felt by Minnesotans due to policies enacted in 2022 under Democrat control.

“We’re giving $1 billion back to Minnesotans to soften the blow of property tax hikes that were the result of the DFL trifecta in 2022,” Niska said.

The announcement comes as Minnesota’s budget outlook has recently improved, as previously reported by The Center Square.

A February forecast from Minnesota Management and Budget projected a $3.7 billion balance for fiscal years 2026-27, an increase of $1.3 billion from prior estimates.

State officials attributed the improved outlook to a stronger economic forecast and higher-than-expected revenues, though they cautioned that much of the revenue growth comes from volatile sources.

Spending is still expected to outpace revenues in future years.

Republican leaders have pointed to the surplus as an opportunity for tax relief and pro-business policies.

“Tax increases on Minnesota families and more government spending should be off the table, and our focus should remain on lowering costs on family budgets,” Demuth said of the February forecast.

Democrats, however, argued that the improved numbers largely benefit wealthier Minnesotans and corporations rather than everyday workers.

Rep. Zack Stephenson, DFL-Coon Rapids and Democratic-Farmer-Labor caucus leader, pointed to the forecast’s rapid growth in “non-wage income” – earnings from capital gains, interest, and dividends – as evidence that the gains are not reaching typical households.

“I was glad to see the improvement in the state’s fiscal position,” Stephenson said. “But regular Minnesotans are still feeling the pain.”

In a supplemental budget proposal unveiled by Gov. Tim Walz in March, the Democrat also proposed tax breaks, including expanding dependent care tax credits for families with young children and a small decrease in the state sales tax.

“There’s no reason the sales tax can’t be expanded to broader numbers so that people who are at the top can pay a little bit on that and the folks at the bottom can see a reduction in the sales tax,” Walz said at that time.

In a statement, House Republicans argued their budget proposal reflects what they are hearing from constituents and urged bipartisan cooperation.

“It reflects what we are hearing from Minnesotans across the state and delivers real solutions that put families first,” the caucus said. “The comeback can start now, if Democrats are willing to stop blocking and start working with us.”

Currently, in the Minnesota State Senate, the Democratic-Farmer-Labor Party holds a slim majority by just one seat. DFL has 34 seats, compared to the Republicans’ 33. In the Minnesota State House, DFL and Republicans are tied—both holding 67 seats.