Rebate checks, tax cuts: Walz, Republicans continue fight over how to spend surplus

Minnesota Gov. Tim Walz on Wednesday called on state lawmakers to return half of the state's budget surplus to taxpayers via direct checks of $1,000 for individuals and $2,000 for families.

House and Senate Republicans quickly labeled the proposal an election-year giveaway and said Minnesotans would benefit more from permanent tax cuts.

The DFL governor and leaders in Minnesota's divided Legislature are still at an impasse a month after the regular legislative session ended and they left billions of dollars from the state's surplus unspent. Both sides held press conferences at the State Capitol on Wednesday pitching their visions for how the remaining money should be spent.

"It's simply unconscionable to be sitting on $7 billion when Minnesotans are trying to make those bill payments," Walz said, noting the checks could help cover rising gas and food prices. "We can't just throw up our hands."

Minnesota couples who jointly earn up to $273,470 would get a $2,000 rebate check under Walz's proposal, while individuals who earn up to $164,000 would receive a $1,000 check.

Walz said the rebate checks would be structured as a state tax credit, making any federal taxes on them refundable.

DFL House Speaker Melissa Hortman endorsed Walz's direct payment proposal for the first time Wednesday, after not including it in final House bills during the legislative session.

"The governor and the House DFL have been working to reduce costs and put money back in the pockets of people who need the help the most," Hortman said.

President Joe Biden also gave Walz's proposal a shout-out during a speech Wednesday.

Walz and Hortman called on Republicans to return to the negotiating table so they can reach an agreement and call a special legislative session. The governor said last week that Senate Republicans were unwilling to make any more offers. Republican Senate Majority Leader Jeremy Miller argued at the time that Democrats would not pass a $4 billion tax cut proposal without "billions more in spending."

Miller and GOP House Minority Leader Kurt Daudt held separate news conferences Wednesday criticizing Walz's latest proposal.

Daudt accused Walz and Democrats of "election-year desperation," alleging they were pitching checks to voters because "the polling numbers are atrocious for Democrats right now."

But Daudt said he would be open to a compromise: "I'm open to a rebate check and permanent tax relief."

Miller did not appear to be supportive of the rebate checks, instead saying the Legislature should pass $8.5 billion in permanent tax cuts that Senate Republicans have proposed. He also said he was skeptical of Walz's claim that the rebate checks would not be taxed, adding the governor had not even told him about the latest proposal before he touted it at the Wednesday news conference.

Miller said Walz and legislative leaders remain deadlocked on a special session agreement.

"There's still a significant impasse on how to do the spending," Miller said.