Senate approves $8.4 billion in tax cuts, and adjourns for Easter Break

The GOP-led Senate approved an $8.4 billion tax cut package on Thursday, 42-24, setting up negotiations with the House DFL, which would use money to bolster child care and education while offering a smaller, targeted tax cut.

Billed as tax cuts for Minnesota families, Republicans argue the state’s projected $9.3 billion budget surplus is evidence the state over collected tax revenues. 

“The state is collecting too much money from the people of Minnesota,” Senate Majority Leader Jeremy Miller, R-Winona, said. 

The GOP plan would accomplish a long-held goal: exempting from state taxes Social Security income. The legislation would also cut taxes for the first income tax bracket. 

Critics of the bill point to a legislative analysis that shows the bill skews towards the state’s highest earners. 

The first-tier tax rate would drop to 2.8% from 5.35%, but the largest benefit in absolute dollars would be to people making more than $150,000. Similarly, the largest beneficiaries of the Social Security tax exemption would be  those making $250,000 or more. Half the tax cut goes to those making less than $125,000.

Still, Republicans maintain lower taxes would help Minnesota become a more competitive state and argued that criticism that the bill benefits the wealthy is overblown. 

“It’s not accurate to say we are favoring the wealthy,” state Sen. Carla Nelson, R-Rochester, said Thursday before debate on the bill began. 

Senate Democrats said GOP priorities leave out funding for education programs they say would make the state more economically competitive.

“Our vision for the future of this state is vastly different than what the Republicans are offering today,” Senate Minority Leader Melisa López Franzen, DFL-Edina, said during debate on the bill. 

Sen. Ann Rest, DFL-New Hope, offered an amendment to the bill that would have sent direct payments to Minnesotans of up to $1,000, a plan sought by Gov. Tim Walz. It failed on a 41-25 vote.

Lawmakers are preparing to take a 10-day recess ahead of Easter, with the break beginning Friday evening. The Senate adjourned until Tuesday, April 19.

Various pieces of legislation are receiving floor votes this week, shaping up the tax and spending debates in the final stretch of the session. 

Miller on Thursday gave an update on another top priority: replenishment of the unemployment insurance trust fund. He told reporters no negotiations have occurred this week and no agreement has been reached.