Home New mexico tax Social Security Part of Biggest Proposed Tax Cut in Minnesota History – How It Could Impact State’s Budget Surplus

Social Security Part of Biggest Proposed Tax Cut in Minnesota History – How It Could Impact State’s Budget Surplus

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Photograph by Gian Lorenzo Ferretti/Getty Images

Minnesota Republicans have proposed the biggest tax cut in state history — including eliminating taxes on all Social Security benefits — in a move that could nearly halve the current state budget surplus.

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In addition to eliminating Social Security income taxes, the proposal would reduce the lowest tier income tax rate from 5.35% to 2.8%, WCCO/CBS Minnesota reported. The proposal was made last week by Minnesota State Senate Republicans.

“Minnesota residents are overtaxed,” State Sen. Gary Dahms (R-Redwood Falls) said in a statement posted on the Minnesota Senate Republican Caucus website. “Our tax proposal targets middle-income families and seniors who often bear the brunt of Minnesota’s high taxes. Every family in Minnesota will see a tax cut in our plan, and we’re working to completely eliminate unfair Social Security income tax once and for all.

The tax cut would eliminate about $3.5 billion of the state’s projected $7.7 billion surplus for the current year, WCCO/CBS Minnesota reported, and also cut the next two-year budget. . The total cost is estimated at more than $8.5 billion over the next three years.

Minnesota Democrats wasted no time pushing back the Republican proposal. Democratic House Tax Committee Chairman Paul Marquart said in a statement that the proposal would primarily benefit Minnesota’s wealthiest taxpayers and also hamper lawmakers’ ability to spend money elsewhere.

Democrats have offered to distribute $1,500 bonus checks to frontline workers, while Democratic Gov. Tim Walz has offered to send relief checks of $175 or $350 to more than 2.7 million homes in Minnesota.

“We can’t do this if Republicans use the budget surplus to offer tax cuts to millionaires and billionaires who don’t need state help,” Marquart said.

The Republican proposal came after the state Senate passed a $2.73 billion bill earlier this month to pay the state’s debt to the federal government for unemployment assistance during the COVID-19 pandemic, and also replenish the Unemployment Insurance Trust Fund to avoid automatic increases in corporate payroll taxes after the March 15 deadline.

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As previously reported by GOBankingRates, Minnesota is one of 12 states that still tax Social Security benefits. The others are Colorado, Connecticut, Kansas, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. However, New Mexico lawmakers recently introduced a bill to exempt Social Security benefits from personal income tax.

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who has previously held positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work has also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal, and Business North Carolina magazine. He holds a BA in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting has won awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A North Carolina native who also writes fiction, Vance’s short story “Saint Christopher” placed second in the 2019 Writer’s Digest short story competition. Two of her short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. Her first novel, Voodoo Hideaway, is published in 2021 by Atmosphere Press.