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Movement in MN Legislature regarding paid leave mandate and tax legislation

February 1, 2023

A proposal is currently moving through the Minnesota legislature which includes a plan to mandate 24-weeks of paid leave. The proposal, HF2 / SF2, passed another committee stop last week and could be voted on in the House or Senate soon. To fund the new paid leave mandate, the state would impose a 0.7% payroll tax on Minnesota employers, regardless of size or number of employees. The paid leave mandate is included in Governor Walz’s initial budget proposal he released last week.

Some of the other provisions in the budget proposal include:

  • An increase in capital gains and dividends tax rates. A proposed 1.5% surcharge on capital gains and dividends exceeding $500,000 and a 4% surcharge on those exceeding $1 million.
  • A recommended enactment of a 1/8th cent sales tax in the seven-county metropolitan area, beginning in October of 2023, to expand investment in the regional transit system.
  • A 0.7% payroll tax on employers, regardless of size, to fund the proposed 24-week paid leave mandate.
  • Tax credits for child care costs are on the table for families making under $200,000. This would total over $1 billion over four years.
  • Proposed payouts to Minnesota residents. Individuals making less than $75,000 a year would receive $1,000 and families earning under $150,000 a year would be eligible for $2,000. Households would also qualify for an extra $200 per dependent (with a limit of three). This money would be non-taxable and would come out of the surplus, totaling nearly $4 billion.
  • 26% spending growth of $13.4 billion, growing general fund budget to $65.2 billion for FY 2024/25 over the current law budget of $51.76 billion FY 2022/23

In regards to the state tax on Social Security benefits, Walz’s proposed budget plan would keep it in place but reduce this tax burden to the tune of $219 million. More information on this and the governor’s other budget recommendations can be found here.

Our team is staying informed as this moves through the legislature. If you have questions about what these changes may mean for yourself and your business, reach out to us to discuss.


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Chris Powers, CPA

Chris helps her clients confidently navigate tricky tax laws and complex regulatory challenges.

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