Gov. Tim Walz trumpeted the "largest tax cuts in state history" in his two-year budget, yet tucked amid the expansive benefits for families and seniors there are also higher fees and new taxes.

In his public presentation Tuesday at the Department of Revenue with all his commissioners by his side, Walz highlighted his proposal for rebate checks, Social Security tax trims and expanded credits for families raising children and facing child-care costs. He said his $8 billion in tax cuts would relieve pressures on Minnesotans' budgets.

"If you do have children in school, if you do have day care, if you are a worker and making less than $150,000, you're going to see direct impacts," Walz said Wednesday during a bill signing ceremony.

At the same time, the DFL governor is proposing new taxes and increased fees that would fall on Minnesotans who earn paychecks, shop in the seven-county Twin Cities metro area, buy fishing permits, own passenger vehicles, and those who sell assets worth more than $500,000. He also proposed a cannabis tax if the Legislature legalizes marijuana.

Some of those tax and fee hikes would generate at least $1.1 billion combined in the next two years. That amount doesn't include the proposed payroll tax increase that would kick in during the following budget and generate an estimated more than $1 billion a year.

Citing the $17.5 billion projected budget surplus, Republicans rejected the proposed hikes. Senate Minority Leader Mark Johnson, R-East Grand Forks, said Wednesday he had heard from constituents "disheartened" by the Walz proposal. "Minnesotans are very upset that we see these small tokens coming back and government is growing by 22 to 25 percent," Johnson said.

The governor's $65.2 billion budget proposal is the starting point for legislative deliberations in the coming months. Big and small changes are likely because even though Democrats control the House and Senate, they don't agree on everything in the Walz plan.

Here's a breakdown of the governor's proposed tax and fee increases and recommended tax cuts:

Taxes and fees

Metro sales tax: Walz proposed a new eighth-of-a-cent sales tax in the seven-county metro area to boost funding for the region's public transit system. The money for the Metropolitan Council could be used to operate existing transit lines and to build new ones, including the $2.7 billion Southwest light-rail line linking downtown Minneapolis to Eden Prairie. The council needs to find up to $260 million to finish the controversial Southwest project, an extension of the current Green Line. So far, the state has contributed just $30 million to Southwest's bottom line, with Hennepin County and the federal government making up most of the rest. The new tax would go into effect in October, raising $60 million in fiscal 2024 and $93 million in 2025.

Payroll tax: Walz and DFL legislators want Minnesota to create a paid family and medical leave program, allowing workers to take time off to care for a loved one or themselves. The governor would use some surplus cash to start the program and a payroll tax to sustain it. Walz aims to impose a 0.6% premium on wages starting July 1, 2026. Employee contributions would cover half the rate, employers would make up the other half. The state estimates the premium would generate around $1.2 billion in 2027.

Capital gains: Minnesota does not have a separate capital gains tax like the federal government does for assets held more than a year, but Walz is proposing one. When a taxpayer sells an asset like a home, stock or business, the difference between the sales price and the asset's value is either a capital gain or loss. Walz proposed a new Minnesota tax of 1.5% on gains and dividends between $500,000 and $1 million. He proposed a new 4% tax on gains over $1 million for individuals, trusts and estates. The tax would bring in a projected $661 million in the next two years.

Car tab fees: Minnesota law imposes a tax of $10 plus 1.285% of the base value of passenger vehicles, adjusted by a percentage based on the age of the vehicle. It's 100% the first year and declines 10 percentage points each year until it hits 10%. The flat tax for vehicles over 10 years old and the minimum tax for all vehicles is $35. Beginning on Jan. 1, 2024, Walz proposed bumping the first year of registration to 160% of the manufacturer's suggested retail price of the car. In the next year, Walz proposed a tax at 100%, dropping 10 percentage points each year to 20%. The minimum tax would drop to $30. The increase would bring in an additional $286 million over the next biennium.

DNR fees: Minnesotans would see fee increases when they head to state parks or purchase fishing licenses and boat registrations under Walz's budget. An annual state parks pass would rise from $35 to $45. Daily admission would go up from $7 to $10. Together, those increases would raise an estimated $20 million a year.

Marijuana: The governor's budget includes the legalization of marijuana and the creation of a new state office to oversee its regulation. If lawmakers legalize marijuana for adults this session, Walz wants to impose a 15% tax on recreational cannabis products. That's higher than the 8% tax proposed by DFLers in the Legislature.

Tax breaks

Checks: Individuals with $75,000 or less in federally adjusted gross income would get $1,000 and couples earning $150,000 or less would receive $2,000 under Walz's plan. Families would get $200 for each dependent, up to three kids. More than 2.5 million households could see the payments, but legislators have been lukewarm on the idea.

Social Security tax cut: Under the governor's plan, the state would increase the number of households in Minnesota that get Social Security benefits tax free, but would not completely eliminate the tax, as some Democrats in the Legislature are proposing. The Walz administration estimates the change would cut an average of $278 in taxes for 377,000 households that receive Social Security benefits.

Child tax credit: Lower-income families with children would receive $1,000 per kid, up to $3,000. Some families with adults who have special needs could also qualify. How much a family gets phases out if a married couple earns more than $50,000 or a single parent makes $33,300.

Child-care credit: More Minnesotans would qualify for help with child-care costs under this credit expansion. It raises the income threshold at which the credit starts to phase out from the current level of $55,300 to $200,000 for a married couple. Walz's administration estimated the changes would boost how much families save from the credit, on average, from $500 to $1,500.

Angel Tax Credit: Walz recommended $10 million for Angel Tax Credits every year for the next four fiscal years beginning July 1. The credit would go to investors and funds that put equity into early-stage businesses focused on technology and new proprietary products, processes or services in specified fields. Started in 2010, the program has been funded at various levels from zero to $15 million annually.

State Historic Rehabilitation Tax Credit: The governor's budget proposal would revive a state tax credit to rehabilitate historic buildings that expired in June. The 20% tax credit could go toward the rehabilitation of a structure listed on the National Register of Historic Places or one that contributes to a registered historic district.

Staff writer Janet Moore contributed to this report.