On Thursday, Senate Republicans proposed significant changes to the state’s tax code. 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 and provide $8.51 billion in tax relief to taxpayers over the next three years. 

“Minnesotans are overtaxed, and their budgets are being stretched thin as they fight record growing inflation,” Senator Mark Koran (R-North Branch) said. “Instead of using our surplus to fund growing government spending or giving away frivolous one-time campaign checks, we’re making it a priority to help Minnesotans young and old with sustainable long-term relief.”

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 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. Bills introduced to eliminate the Social Security tax in the legislature have had bipartisan support.

Last December, the state’s budget forecast included a $7.7 billion surplus. An updated budget forecast is planned for Monday, February 28.