GOP legislators propose cutting state taxes on Social Security, income

Minnesota Republicans released their tax plan Tuesday, including one-time rebate checks for all Minnesotans, eliminating the state tax on Social Security benefits and slashing the individual income tax.

The GOP tax package’s prospects are relatively dim in the DFL-controlled House and Senate, but Republican legislators argue that their tax plan includes benefits that Minnesotans want. Republican lawmakers unveiled their “Give It Back” tax plan a day after the state released its February budget forecast — which legislators use to craft Minnesota’s biennium budget — of a $17.5 billion surplus for the next two years. 

“It’s not partisan. Minnesotans need tax relief,” said House Minority Leader Lisa Demuth, R-Cold Spring. “Minnesota is a great place to live and to work and to raise a family, and we need to keep it that way … It needs to be affordable and keeping money in the pockets of Minnesotans is how we can do that.”

Under the Republican plan, single filers — regardless of their income — would receive a one-time $1,250 rebate check, while joint filers would receive $2,500. The cost of these checks would be about $5 billion.

Gov. Tim Walz’s and DFL legislators are also proposing one-time rebate checks but with limits. Walz’s plan includes $2,000 checks to Minnesota families with income below $150,000 and $1,000 checks for single filers making less than $75,000. Filers above those incomes would get nothing. Checks would be sent to about 2.5 million Minnesotans, Walz said. 

Walz proposed rebate checks last year, but the proposal stalled in the Republican-controlled Senate. They wanted permanent tax cuts instead and were unsupportive of the name “Walz checks.” Republicans said they support rebate checks this year because the budget surplus is larger and Minnesotans need financial help.

Republicans also proposed an $1,800 child tax credit for children under 18 with no strings attached; Walz’s plan would give $1,000 checks per child — for up to three children — to families making less than $50,000, phased out for higher-income households. 

Republicans want to eliminate Minnesota’s tax on Social Security benefits. The tax applies to less than half of Minnesota Social Security recipients.

DFL leadership is unenthusiastic about eliminating the tax, arguing it would give a tax break to wealthy Social Security recipients and leave out assistance for people who need it the most. 

Multiple Democrats in the House and Senate campaigned on eliminating the tax on Social Security benefits, however, and Republicans said if the proposal doesn’t pass, they will use the broken campaign promise against Democrats in the next election.

“If they (Democrats) cannot do it, we will remind the voters of Minnesota that they failed to do that when they were in control of everything,” said Sen. Bill Weber, R-Luverne. Weber is also the Republican lead on the Senate Taxes Committee.

Republicans also proposed decreasing the first two income tax tiers by one percentage point, which would cost Minnesota about $3 billion during the next two years.

Minnesota has a steeply progressive individual income tax, meaning households with higher incomes have a higher tax rate as a share of their income compared to lower income households. Republicans propose decreasing the first two tiers to 4.3% and 5.8%.

For example, a head of household filer making $50,000 annually would pay a 4.3% tax on their first $37,010 and a 5.8% tax on the rest of their income under the Republicans’ proposal.

But high-income, head of household filers would also benefit by paying less tax on their first $37,010, as well the rest of their salary up to $148,730. 

Democrats argue these large, permanent reductions in taxes would create shortfalls should a recession arrive, requiring damaging cuts to education and other important programs.

Finally, the GOP proposal would also increase the state’s property tax homestead exemptions for residential property by 25%, with the goal of providing tax relief to the state’s homeowners.

“Folks, we’ve got a great plan that should excite Minnesotans — create opportunities, create freedoms, create a legacy for Minnesota. I am very excited,” said Sen. Minority Leader Mark Johnson, R-East Grand Forks.