MN Senate passes budget bill to fund metro tax hike to benefit affordable housing programs
ST. PAUL, Minn. -- The Minnesota Senate on Tuesday passed an $1 billion housing budget bill, which includes a sales tax increase for Twin Cities metro residents.
Under the proposal, there's 0.25% sales tax hike in seven-county region, which include Anoka, Carver, Dakota, Hennepin, Ramsey and Scott counties, to support rental assistance and aid to local governments for affordable housing development.
A Department of Revenue estimate expects it to generate nearly $200 million per year by 2027. Lawmakers say the increase is necessary to fix what advocates say is an affordable housing crisis that needs long-term investment.
"It is tax that will benefit the lowest income among us the most and keep them in stable housing, which is the most regressive cost we have on Minnesotans," said Sen. Lindsey Port, DFL-Burnsville, the bill's sponsor.
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The state is short more than 100,000 thousand affordable rental homes, according to an analysis by the National Low Income Housing Coalition, and more than 167,000 households here are extremely low income. Most of the people are cost-burdened, which means they spend more than 30% of their monthly income on housing.
The bill also includes tens of millions of dollars assistance for first-generation homeowners to put a down payment on a home, and additional money to preserve existing public housing and affordable housing infrastructure, among several other provisions in the 70-page bill.
Republicans during the Senate floor debate criticized the sales tax hike at a time when the state has a $17 billion surplus, which they call a sign of "over taxation" in Minnesota. The Senate Democrats' initial plan did not include the tax increase.
"I find that very difficult to put my mind around that we'd be increasing taxes at a time when we have such a massive surplus," said Sen. Carla Nelson, R-Rochester.
The move comes one day after the Minnesota House of Representatives approved the language, which was a deal between negotiators in both chambers as lawmakers hammer out details of budget plans in session's final weeks. It now goes Gov. Tim Walz's desk for signature.
The 0.25% increase means Minnesotans would pay an extra 25 cents on a $100 purchase. Certain items like groceries and clothing are exempt from sales taxes.
"It is absolutely bananas to me that the people who are impacted by this bill are being completely left out of the conversation. And instead, we're having a conversation about spending 50-cents more on every $200 you spend," said Sen. Erin Maye Quade, DFL-Apple Valley. "I will gladly spend 50-cents more on my face creams so 150,000 families in the state of Minnesota won't be homeless anymore."