Walz Unveils Supplemental Budget with Tax Cuts, AI Funds

Minnesota Governor Tim Walz unveiled a supplemental budget proposal on March 17, 2026, at the St. Paul Eastside YMCA, aiming to reduce costs for middle-class families, fund preparations for artificial intelligence disruptions and support communities affected by a recent federal immigration enforcement operation. The plan builds on the state's $66 billion two-year budget passed last June and includes tax adjustments, expanded credits and targeted spending reductions amid a recently improved fiscal outlook.

The proposal features the state's first-ever sales tax rate cut, lowering it by 0.075 percentage points to ease everyday expenses for residents. To offset lost revenue, it would extend the tax to currently exempt professional services, such as legal, banking, accounting and brokerage work. Officials estimate this change would save Minnesotans about 75 cents per $1,000 spent on taxable goods while generating funds from higher-income sectors.

A centerpiece is the expansion of the Child and Dependent Care Tax Credit, which would nearly triple allowable expenses to $3,000 for one child and $6,000 for two or more. According to Paul Marquart, commissioner of the Minnesota Department...