Social Security tax elimination to be considered by Minnesota lawmakers

MINNEAPOLIS — Minnesotans have heard a lot about the DFL Party trifecta at the State Capitol, and the sweeping agenda the DFL is proposing in light of a $17.6 billion surplus. What you are hearing a lot less about are tax cut proposals.

Last spring, when the surplus was merely in the $9 billion range, legislative leaders from the DFL, GOP and the governor's office reached a grand deal that included investments in education and other programs, and the elimination of the tax on Social Security income. That agreement lasted just a few days. 

Now the legislature is back with a much larger budget surplus, and you're not hearing a lot from DFL leaders who control the legislature about eliminating that tax. Minnesota is one of only 12 states that taxes Social Security income. 

The Minnesota Department of Revenue estimates the elimination of Social Security tax would affect more than 400,000 tax returns, where the tax bill would be lowered an average $1,200. It would also eliminate more than $500,000 million per year in tax revenue for the state.

DFL legislators are concerned about that last part, which means when there is a bad economic year, a $500 million source of revenue is gone.

DFL House Speaker Melissa Hortman and new DFL Senate Majority Leader Kari Dziedzic were both guests on WCCO Sunday Morning. 

"It ends up giving a tax cut to billionaires and multimillionaires. So when you have people who are making hundreds of millions of dollars a year, or billionaires, they probably don't need a tax cut," Hortman said. "That money could probably be better invested in the economy and other places."

"The Senate's gonna hear the Social Security tax cut bill to repeal and eliminate the taxes on Social Security, I think they're gonna hear it this week, so we're gonna hear bills and we want Minnesotans at the table telling us what they feel about these bills, and then we'll make a decision," Dziedzic said.

Other proposed tax cuts include a reduction in overall tax rates and an increase in the child tax credit.

Another proposal for direct taxpayer relief are the so-called "Walz checks" – direct cash payments to Minnesotans. Earlier this year, Gov. Tim Walz proposed checks as large as $2,000 per couple and $1,000 for singles. 

Most DFLers are definitely not on board for that large an amount, and Walz says he will continue to push for some amount to go directly back to the people.

You can watch WCCO Sunday Morning with Esme Murphy and Joseph Dames every Sunday at 6 a.m. and at 10:30 a.m.