Tim Walz’s Tax Hikes Have Sparked Battles With Minnesota Businesses

Six years before Tim Walz was chosen as Vice President Kamala Harris’s running mate, he was busy running for governor of Minnesota. Shortly before Election Day, Walz gathered with dozens of business leaders at a luxury hotel off the shores of Gull Lake.

Eric Gibson, then president of Ultra Machining Company, recalls asking Walz whether the Democrat believed high state and corporate taxes hurt workers.

“We’re not taxing people,” Walz responded, according to Gibson. “We’re taxing corporations.”

For Geoff Baker, “it was an ‘Oh s—‘ moment,” he recalled to Vscek, confirming Gibson’s account. “That’s not what I wanted to hear,” said Baker, president of McFarland Truck Lines.

Minnesota currently taxes corporate income at 9.8%. The nonpartisan Tax Foundation says that is the highest tax rate of any state in the nation.

Walz’s approach to corporate and other business-related taxes hasn’t changed noticeably since that meeting at Gull Lake. Especially since Democrats secured a trifecta majority in 2022, taking control of the state House, Senate and governor’s office.

“It’s been tense,” said Douglas Loon, president and CEO of the Minnesota Chamber of Commerce, describing the trade association’s relationship with Walz. The chamber has more than 6,000 members, including Fortune 500 giants like Target, UnitedHealth Group AND Best buy.

Vscek spoke to about a half-dozen people familiar with the fighting and reviewed letters to the governor and disclosure reports of the state’s lobbying activities.

They reveal that Walz’s political battles have had a common theme: Walz has supported raising taxes on the wealthy or on corporations, and business leaders have fought back.

One of the battles was over a 1% surcharge that applies to passive investment income over $1 million. Walz also signed a bill enacting a low-tax global intangible income tax.[GILTI].

Another new tax on the wealthy, signed into law by Walz, limits standard and specific tax deductions for families with gross incomes above $220,000.

But while Walz was often willing to meet with business interests and listen to their arguments, the governor and his fellow Democrats in power rarely yielded.

The impression business groups and executives got after meeting with Walz was that the two-term incumbent governor wasn’t always interested in compromise.

As Harris prepares to release her first economic policy plans later this week, investors and business leaders will be watching closely to see whether Walz’s approach to the tax code will be reflected in the priorities of a potential Harris administration.

One of the biggest recent battles between Walz and the state’s businesses has been over a new payroll tax to fund universal paid family and medical leave for Minnesotans.

According to the Tax Policy Center, the bill, which Walz signed in 2023 and will take effect in 2026, would impose a 0.7 percent payroll tax on employees’ wages, with the tax payment split between employers and employees.

At the time, state regulators said the payroll tax could eventually rise to 0.88%, a figure often cited by opponents of the tax. But supporters believed a new payroll tax could raise more than $300 million to help fund the paid family leave plan, according to the Minnesota Reformer.

Strong lobbying against the bill also resulted in meetings with the governor himself.

According to Baker, who was present at the meeting and whose company is a member of the pro-business lobbying group, at least eight representatives of the Minnesota Chamber of Commerce, including Loon, met with the governor at his office in St. Paul, Minn., last year to oppose the bill before the governor signed it.

“We were very concerned about the corporate benefits mandates,” including how businesses might be impacted by the payroll tax, Baker said. They also tried to encourage Walz to move forward with other tax reform legislation to try to get the state out of the top corporate income tax bracket, Baker said.

Even though Walz listened to them, the governor signed the bill anyway, and the state continues to have the highest corporate tax rate.

For another perspective on Walz and taxes, the Harris campaign referred Vscek to Bill George, a Minnesota entrepreneur and former CEO of Medtronic.

George said Walz was willing to compromise on business.

One example he cited was a recent bill that would have imposed a minimum wage in Minnesota. The bill passed the state legislature, but ride-sharing giants Uber and Lyft threatened to reduce their presence in the state because of it.

Walz vetoed the legislation in 2023. He later signed a separate bill to increase ride-sharing drivers’ wages.

George said he considers Minnesota a great place to do business, but acknowledged that some taxes are high.

“People don’t always like the tax environment. But as long as taxes are going to help people, I’m all for it,” he said.

George also admitted that once Walz and the Democrats gained control of the Legislature in the 2022 elections, they moved more quickly to raise some taxes on the wealthy.

“They wanted to get something for the people,” he said.

Harris’s team noted that Minnesota ranks sixth nationally as the best place to do business, according to the Vscek study.

They also highlighted several private sector investments in Minnesota, such as the ongoing $5 billion expansion of the Mayo Clinic in Rochester, Minnesota.

In an official statement, the Harris campaign said Walz was a strong leader and enacted policies that lowered taxes for working families.

“After Donald Trump devastated our nation’s economy, Governor Walz led Minnesota with strong leadership, competent management and smart policies, cutting taxes for working families and achieving the lowest state unemployment rate in recorded history,” said Harris campaign spokesman Charles Lutvak.

“Every day until November 5, Trump will have to defend his record of instability and his unpopular anti-growth agenda against Team Harris-Walz’s record and vision of promoting corporate growth, creating jobs and reducing costs for the American people.”