Senate Republicans proposed major changes to the state’s tax code today. The proposal reduces the first-tier income tax rate from 5.35% to 2.8% and eliminates the tax on Social Security. If passed, the changes would be the biggest tax cut ever in Minnesota and provide $8.51 billion in tax relief to taxpayers over the next three years.
“The rate of inflation in the country is staggering. Minnesota’s working families are struggling with rising costs on everything from gas to beef,” Senator Mark Johnson (R-East Grand Forks) said. “We need substantial long-term relief. The largest state surplus in history was produced by overtaxing. Minnesotans deserve the biggest tax cut in Minnesota history. Our plan will give substantial tax relief month after month, year after year to every Minnesota taxpayer. This includes eliminating the unfair double tax on Social Security.”
According to the National Tax Foundation, Minnesota’s lowest tax bracket is higher than the highest tax bracket in 17 other states. Under the Republican proposal, a Minnesota family making $100,000 would see a tax savings of $1,000 each year. A typical individual making $37,000 would receive about a $500 annual reduction. Under the Governor’s tax proposal, the same family would receive one $375 check, and an individual filer would receive a $175 check, with no long-term savings or reductions.
The proposal also eliminates the tax on Social Security and Disability Income, something Republicans have advocated for years. Minnesota is one of just 13 states who tax Social Security benefits and is partially surrounded by states who do not tax this benefit – Iowa, Wisconsin, Michigan, and South Dakota. Estimates show for the 410,900 Minnesotans who pay this tax, the average relief would be $1,313. Eliminating the Social Security tax would put $539 million back into the hands of beneficiaries.
Last December, the state’s budget forecast included a $7.7 billion surplus. An updated budget forecast is planned for Monday, February 28th.