Minnesota tax committee hears governor—s tax proposal; sales-tax expansion, R&D credit, AIS and forest-payments draw concern

At a Minnesota Senate Taxes Committee hearing, Department of Revenue Commissioner Paul Marquardt presented the tax portions of Governor Tim Walz—s budget proposal (Senate File 2374) and answered senators— questions while stakeholders testified about likely local impacts.

Marquardt, joined by Joanna Baers, legislative director, described the bill as seeking "a more fair and more stable tax system" and said the proposal—s mix of rate and base changes aims to address roughly half of a stated structural budget imbalance. "I am Paul Marquardt, a commissioner of the Department of Revenue," he said as he opened the presentation.

The bill covers multiple areas. Key provisions Marquardt outlined include: a sales-tax rate reduction paired with an expansion of taxable services (Article 3); a refundable expansion of the research-and-development credit (refundable up to 25 percent of excess credits); additions to sustainable aviation fuel policy and credits (Article 1); an adjustment and decoupling of the airline flight property tax to set a fixed levy for the state airport fund (Article 2); and a mix of program reductions and statutory changes in Articles 2 and 4 that would affect aquatic invasive-species (AIS) aid, sustainable-forest incentive payments and local cannabis aid.

On the sales-tax proposal, Marquardt said the administration is combining a narrower rate and a broader base: a cut of 0.075 percentage points in the statewide rate (the presentation referenced the existing legacy 0.375 share) alongside adding many consumer-facing services to the tax base. He summarized modeled impacts: an estimated $99 million reduction in FY27 from the rate…