How will Trump’s big bill affect Minnesota?

WASHINGTON – The sprawling tax and spending bill approved by Congress on Thursday contains a number of changes to government spending sought by President Donald Trump that will affect Minnesotans in new and likely profound ways.

Trump’s signature legislation contains a permanent tax cut for individuals, write-offs for businesses, tax exemptions on some tips and cuts to federal entitlements, including nutrition and Medicaid. Congressional accountants expect the law to add $3.3 trillion to the deficit.

Minnesotans paying close attention to H.R.1 know the measure was supposed to be much larger and hit closer to home, including a provision axed by the Senate parliamentarian that would’ve restored copper-nickel mining leases on the Iron Range in the Superior National Forest.

The bill’s impacts are still being analyzed, but here’s what we know so far:

The heart of the reconciliation legislation makes permanent a flurry of tax cuts, including a higher standard deduction enacted in 2017 during Trump’s first term. The bill also extends tax write-offs that small businesses make on equipment and puts a lower cap on the tax credit corporations receive for charitable giving.

These tax cuts, which public opinion polls say are the most popular portions of the 870-page megabill, have ruled GOP messaging. The White House said if Congress had failed to act, Americans would’ve seen a $4 trillion tax hike at year’s end.

“This bill is President Trump’s ‘Make American Great Again’ agenda being codified into law,” House Majority Whip Tom Emmer, R-Minn., said Thursday after the bill passed. “From Minnesota to Texas, and Maine to California, there are wins in this legislation for every single American.”

Emmer and the other three Minnesota Republicans voted for the bill; all Minnesota Democrats voted against it.

A Trump campaign promise to remove a tax on tipped income also remains in the bill, though the language that emerged out of the Senate was less generous than the House version.

Under the revised reform, tipped workers making less than $150,000 could deduct up to $25,000 in tips. The deductions also phase out for higher-earning workers.

But the ramifications for working-class Americans in the overall bill are disputed. While exemptions of tipped and some overtime income are seen as gestures to the middle and lower socioeconomic strata, economists at the Yale Budget Lab say the reconciliation bill would result in a nearly 3% decline in income (about $700) for people in the bottom quarter of American earners. By comparison, the Lab says the top 1% of Americans would see a 2%, or $30,000, increase in income.

More than 440,000 Minnesotans use SNAP, nearly a third of them children, according to state estimates.

To pay for dropping government revenue, the bill cuts government services, including putting stricter work requirements on people who use the Supplemental Nutrition Assistance Program, or food stamps.

There are other changes to SNAP, too, notably that the feds will only fully fund SNAP benefits to states with an error rate below 6%. According to the Association of Minnesota Communities (AMC), Minnesota is expected to score above that error rate, thereby reducing federal funding for benefits. In 2022, Minnesota’s error rate hit over 8%.

“Minnesota’s error rate isn’t great,” said Linnea Mirsch, director of public health and human services for St. Louis County in Duluth. “But it can be client errors, worker errors,” she said, which doesn’t mean fraud.

The bill also cuts in half how much money the federal government sends to local governments to administer SNAP. Since Minnesota is one of only 10 states where counties run food stamps, locals expect a hike in property taxes.

“It’s a one-two punch,” said Kevin Paap, a Blue Earth County commissioner. “Not only does it decrease the federal funding for the cost sharing for benefits, but it increases the administrative responsibility. We’re kind of getting it on both sides.”

In the Mankato area, estimates from AMC say Blue Earth County would have to raise its property tax levy 4% to 6% just to keep up with SNAP benefits, not counting some of the other expenditures county officials feel they must make to provide services.

“There’s just no way we can absorb those costs,” Paap said.

Medical Assistance — Minnesota’s version of Medicaid — covers about 1.2 million Minnesotans. State officials have predicted many people will lose health care coverage under the federal bill. People ages 19 to 64 will have to meet “community engagement requirements,” such as working or doing community service at least 80 hours per month. Some recipients are exempt, including those who have children younger than 14.

States must start checking recipients’ eligibility twice a year, instead of once. Opponents of the changes say bureaucratic hurdles from work requirements and increased eligibility checks will cause qualified people to lose care.

The bill would also reduce the so-called provider tax, which states use to help fund Medicaid.

Planned Parenthood would lose funding under the bill, which prohibits payments for one year to certain providers offering abortion services.

However, the Senate parliamentarian blocked some measures that would have affected Minnesota, including a provision that would have barred Medicaid payments for gender-affirming care and a reduction in Medicaid matching funds to states offering undocumented immigrants health care coverage.

The budget bill “will cripple our nation’s health,” said U.S. Rep. Kelly Morrison, a Democrat and OB-GYN. After the Senate passed the bill, she testified that it would kick Americans off health insurance, force hospitals to close, restrict access to reproductive care and make more families go bankrupt from medical debt.

Cuts to the federal Medicaid program affect all 139 hospitals in Minnesota but hit particularly hard the roughly 80% of hospitals that serve rural communities.

Nearly a quarter of Minnesotans gained health coverage from the publicly subsidized program in 2023, according to state estimates, but that rate exceeded 31% in 17 rural counties.

If cuts or new work requirements make it harder for Minnesotans to access Medicaid, then they are likely to become uninsured and avoid health care until they suffer costly emergencies, said Dr. David Herman, chief executive of Duluth-based Essentia Health, which operates hospitals across northern Minnesota.

“They are at a tipping point,” Herman said of rural hospitals. “And if the loss of Medicaid reimbursement for the patients that they’re privileged to serve increases, it’s very likely that some or many of them may either decrease services or close a facility altogether.”

Minnesota hospitals are seeking federal permission to create a directed-payment program by which they pay around $800 million in special taxes to the state but gain $1.8 billion back in heightened payments from Medicaid. However, the bill would gradually reduce how much hospitals could collect from directed payments, negating much of the potential benefit.

The bill sets aside a $50 billion rural hospital stabilization fund as a buffer amid looming cuts. However, it’s unclear how that funding will be allocated to rural hospitals.

The bill would quickly phase out hundreds of billions of dollars in tax credits for climate and clean energy projects under the 2022 Inflation Reduction Act, including some incentives intended to last for another 10 years. Companies will now have to begin construction of their projects within a year of the bill’s enactment in order to qualify for the credits.

“We already have had business members say that there are residential and small commercial solar projects that are either being paused or have been canceled,” said Gregg Mast, executive director of Clean Energy Economy Minnesota, an industry group representing wind and solar energy companies in the state.

Early analyses have estimated that over the next five years, Minnesota stands to lose between 4,600 and 14,400 clean energy jobs under the new legislation. Minnesota’s solar industry alone, which employs about 5,000 people, could lose half of those jobs, Mast said.

A small section championed by GOP Rep. Pete Stauber that would have stripped the Superior National Forest of a Biden-era mining moratorium and restored leases to mining companies, such as the Twin Metals project in Hoyt Lakes, was removed.

Democratic Sen. Tina Smith advocated for removing that language to the Senate parliamentarian, arguing the provision fell afoul of the Byrd Rule, which says if a measure’s budgetary impact is not significant, it doesn’t belong in a budget reconciliation bill.

On a 99-1 vote, the Senate also voted to remove a 10-year moratorium on states passing artificial intelligence regulations, lest they forfeit federal broadband dollars.

Jeremy Olson, Trey Mewes, Kristoffer Tigue and Nathaniel Minor from the Minnesota Star Tribune contributed to this story.