Minnesota Governor Tim Walz, Vice President Kamala Harris’s new running mate, has a tax policy record that could add new weight to the tax debate in the 2024 election campaign.

As governor, Walz created the nation’s largest state child tax credit and cut taxes on benefits, but partially offset those tax cuts with various tax increases on the state’s high-income households and businesses. In addition, he created a new payroll tax to fund the state’s paid family leave program and enacted a cannabis tax on recreational sales.

Much of Walz’s policies align with the broad outlines, if not the details, of Harris’s previous positions on tax policy: increasing tax revenues from high-income households to finance ambitious policies and using the tax code to directly achieve policy goals.

As with any governor, however, it is important to remember that his record in Minnesota will not be easily transferred to next year’s tax debate. Walz’s state has enjoyed large budget surpluses in recent years, while the federal government operates in a significantly different fiscal environment.

Moreover, all of these measures were only implemented after Democrats gained full control of the state legislature in 2022—the state’s Republicans rejected his tax agenda—and we have no idea who will be in control of Congress next year.

But here are five of Walz’s tax policies that could play an important role in the election campaign over the next three months.

“The best child allowance in the country”, Tim Walz

Twelve states have implemented or expanded a CTC since the American Rescue Plan temporarily but significantly expanded the federal CTC in 2021. At $1,750 per child, Minnesota now offers the largest state CTC in the country. Minnesota’s CTC is also available to a relatively large number of families because its eligibility rules regarding children’s ages and household income are broader than in many other states.

Although the CTC has bipartisan appeal, debates over work requirements have stalled credit expansion proposals in Congress, including a bipartisan tax deal that recently failed in the Senate. In contrast, Minnesota’s CTC is “fully refundable” and therefore not subject to income adjustment. As a result, a Minnesota family with one eligible child but little or no income can receive the state credit even if they don’t qualify for the federal CTC.

Social Security tax cuts: Walz vs. Trump

As part of the tax legislation Walz signed in 2023, Minnesota exempts Social Security income from state taxes for single filers earning less than $78,000 and married filers earning less than $100,000.

Meanwhile, Donald Trump recently proposed eliminating the federal income tax on Social Security benefits entirely. The Trump proposal included no income caps, and an analysis by the Tax Policy Center found that the greatest benefits would go to middle- and upper-income households.

The biggest difference between the two proposals, however, is the price and budgetary circumstances. Walz’s exemption will cost the state about $250 million to $300 million annually, less than 1 percent of its total revenue. The relatively affordable cost of this state tax cut, coupled with a large increase in state revenue, is why Minnesota and many other states have passed similar tax cuts or eliminated the tax altogether in recent years.

Trump’s proposal, on the other hand, would cost about $150 billion annually, or about 3 percent of current federal revenue. More importantly, repealing the law would result in less revenue for the Social Security and Hospital Insurance trust funds, which are already on the verge of insolvency.

Tax increases for companies and high-income households

When governors across the country signed tax cuts for 2021-2023, most of them simply used excess revenue to finance the tax cuts. Minnesota was an exception.

While the law Walz signed in 2023 was a net tax cut, it included some offsetting tax increases. Specifically, the law capped the amount of standard or itemized deductions taxpayers earning more than $220,000 could claim (with tighter limits for those earning more than $1 million), reduced a deduction for dividend income, and created a surtax on capital gains. The law also aligned state tax law with federal rules on the Global Intangible Low-Taxed Income Tax (GILTI)—a minimum tax designed to prevent multinational corporations from shifting profits overseas—which amounted to a tax increase for companies doing business in Minnesota.

Republicans strongly criticized these tax increases, and the bill passed the Senate by a vote of 34 to 33. But these tax increases also provided Walz with the revenue he needed to implement his policy priorities regarding the state CTC and the Social Security exemption.

Payroll tax for paid vacation

Walz has implemented a payroll tax in Minnesota that will fund the state’s new paid family and medical leave program. The new tax is 0.7 percent of employee wages, with employers and employees sharing the tax payment. The Minnesota government can adjust the tax rate to fund the program, but the rate cannot exceed 1.2 percent. Minnesota joins 12 other states and the District of Columbia that have implemented state paid leave programs, most of which are funded by payroll taxes.

Many Democrats, including Harris, are pushing for similar programs at the federal level, but Republicans fundamentally oppose the taxes that fund these programs.

Cannabis taxes

Walz signed a bill legalizing cannabis in Minnesota in 2023. When sales begin in 2025, the state will impose a 10 percent cannabis tax on the purchase price. While a majority of Republicans support legalizing marijuana at the federal level, the map of states where cannabis is legal and illegal still looks roughly like the partisan breakdown on our recent presidential election maps.