Income tax

GOP plan cuts Minnesota Social Security income tax, DFL sees it as a gift to the well-to-do

Republican lawmakers say the answer to stopping more snowbirds from leaving Minnesota is to get rid of the state Social Security income tax.

On Tuesday, the Senate Taxation Committee held a hearing on several measures to reduce or eliminate the tax. Although the panel did not pass any of the bills, committee chairwoman Senator Carla Nelson predicted that her proposal would quickly pass the Republican-controlled Senate.

Nelson’s bill would benefit 410,000 retirees with an average savings of $1,313 per year, estimate by nonpartisan legislative researchers. This would ultimately cost Minnesota more than $600 million a year in lost tax revenue. Minnesota would join 37 other states that do not tax Social Security income.

“I also don’t believe we should be taxing retirees,” said Nelson, R-Rochester. “It’s a significant income for our state, but I submit to you that these benefits have been bought by retirees.”

Republicans have been pushing for the tax relief for years and have said the current projected $7.7 billion budget surplus is the right time. Minnesota budget officials plan to release an updated projection on Monday, which will serve as a guide for lawmakers on how much they can spend on tax cuts and new programs.

At Tuesday’s hearing, critics raised concerns that the tax relief would leave Minnesota without enough money to pay for low-income support programs.

“A complete repeal may not leave us with the significant funds to fund the programs seniors need,” said Mary Jo George of Minnesota’s AARP, who said the advocacy group supports relief. taxes targeting middle-income seniors.

About 55% of Social Security recipients don’t pay Minnesota tax because the state already exempts $5,500 in benefits, nonpartisan House researchers have estimated.

For high-income earners, the amount of benefits subject to tax increases significantly. Democrats said the GOP plan would benefit affluent retirees.

“The State of Minnesota would be misguided to give me this tax benefit eight years from now on money it might invest in health care, child care, transportation, public care facilities, parks “said Sen. Matt Klein. , DFL-Mendota Heights, who is a medical doctor.

But Democrats aren’t entirely opposed to expanding a tax break on Social Security income.

State Sen. Ann Rest, DFL-New Hope, has proposed doubling the current exemption to the first $11,000 of benefits. This proposal would benefit 298,000 people with an average annual savings of $264, estimates from nonpartisan researchers. His bill would cost around $90 million a year.

Proponents of a change said Minnesota loses more than tax base when affluent retirees leave the state.

“I’m really tired of losing the talent and the quality of retirees that we have, because it’s not just their money we’re concerned about,” said Sen. Bill Weber, R-Luverne. “It’s the other contributions they make to our community.”