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 state’s tax on Social Security benefits. If passed, the changes would be the biggest tax cut ever and provide $8.51 billion in tax relief to taxpayers over the next three years.
“Our surplus means just one thing: government took too much money from the taxpayers and it’s time to give it back. And not with a one-time gimmick that barely scratches the surface of inflation. We are serious about passing permanent, ongoing tax relief so Minnesotans get to keep more of their hard-earned dollars,” Senate Majority Leader Jeremy Miller (R-Winona) said. “Lowering income taxes and eliminating social security taxes will benefit every taxpayer immediately and for the long-term. Whether it’s skyrocketing heating bills or higher food costs, inflation is eating away at family budgets. We can and we must do something to help people afford their lives. That is what these proposals do.”
“A massive government surplus at a time when people are hurting calls for us to pass tax relief that helps everyone across the board. As one of the highest taxed states in the country, the most valuable thing we can do to help Minnesotans struggling with inflation is to deliver immediate and permanent tax relief,” said Senate Tax Chair Carla Nelson (R-Rochester).
Nelson continued, “We continue to see surplus after surplus and our budget reserves are full. Indeed, we have done what is needed to prepare our state for a rainy day. Now it is time to right-size Minnesota’s taxes by lowering the tax burden for all income tax filers and by eliminating the double taxation on social security benefits. We can empower Minnesotans and got our state on the right track with this immediate permanent tax relief. Minnesota taxpayers will be glad to know that the Senate tax bill will give them a savings in every paycheck, month after month and year after year.”
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 $350 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. “This is really a no-brainer,” Nelson said. “Minnesota seniors deserve better than harmful taxes on their fixed incomes. We have been chipping away at this for years and it’s time to end the tax on social security.” 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. “Those on fixed incomes are being hit hardest by inflation, and this is one thing we can do to help them. With a massive budget surplus, we have the opportunity to be the 38th state to eliminate the taxation on Social Security benefits,” Sen. Nelson concluded. Eliminating the Social Security tax would put $539 million back into the hands of beneficiaries. Bills introduced to eliminate the Social Security tax in the legislature have had bipartisan support.
“While every family is facing its own unique challenges, we know they need relief, and they need it now,” said Sen. Julia Coleman (R-Waconia) who serves as the Vice-Chair of the Senate Tax Committee. “Families don’t need some big government program that picks winners and losers – they need relief. That’s what’s so great about this tax bill. It delivers meaningful tax relief, not a gimmick, every year going forward.”
Coleman, a mother of three boys under the age of three, continued, “On top of that – we want to see our seniors stay in our communities. There are too many ‘little Minnesota’ communities in lower-tax states like Florida, Texas, or Arizona. We want them to stay here and be part of our communities. We want them to spend time with their grandchildren and not have to count days on a calendar to qualify as a resident of a state with a better tax climate.”
Last December, the state’s budget forecast included a $7.7 billion surplus. An updated budget forecast is planned for Monday, Feb 28th.