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After a contentious debate, Minnesota Senate OKs income tax cut, elimination of social security tax

The bill is unlikely to pick up traction in the Democratic-Farmer-Labor-led House of Representatives.

Sen. Carla Nelson, R-Rochester
Minnesota Sen. Carla Nelson, R-Rochester, on Feb. 24, 2022, introduces a Senate proposal to cut the state's lowest income tax bracket and to drop the tax on social security benefits during a news conference at the Minnesota Capitol complex.
Dana Ferguson / Forum News Service
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ST. PAUL — The Minnesota Senate on Thursday, April 7, voted 42-24 to decrease the rate of the state's lowest income tax bracket and to eliminate the state tax on social security benefits.

The push to permanently cut income taxes for Minnesotans was a top priority for Republican lawmakers coming into the 2022 legislative session. And they argued that with a $9.25 billion budget surplus, the state was in a position to re-write the tax code to provide an ongoing benefit for Minnesota taxpayers.

After a more than two-hour debate, the chamber advanced the proposal but it faces a steep path forward in the Legislature. Minnesota Democrats, who control the House of Representatives, have opposed permanent income tax cuts and instead have favored heftier tax credits for families, workers and seniors in the state.

Under the proposal, the state's first income tax bracket would be cut from 5.35% to 2.8%, a move that would affect all those that pay the tax. Bill authors estimated that a couple that made up to $100,000 a year would see roughly $1000 in savings under the proposal.

And overall, 2.4 million taxpayers could see a cut as a result of the change, they said.

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“Our state coffers are full but Minnesotans are still struggling,” bill author Sen. Carla Nelson, R-Rochester, said. “This is not a one-time gimmick that we’re proposing, this is permanent, ongoing month after month, paycheck after paycheck, year after year tax relief and that’s what Minnesotans need."

Nelson's proposal also drops a state tax on social security benefits. If approved, the changes would cost $3.3 billion next year and $5 billion in the two years that followed.

Democratic-Farmer-Labor lawmakers said the plan would offer benefits to wealthy Minnesotans and said the state should offer aid to middle-class and needier residents, instead. And they raised concerns about using a one-time budget surplus for a permanent tax cut.

"We have a tax bill that gives a huge tax cut to the richest two percent," Sen. Jason Isaacson, DFL-Shoreview, said. "So I hope we think about that and move forward and maybe make some better decisions about our tax dollars and support those that desperately need it."

Democrats offered amendments on the floor that would add a provision to send $500 rebate checks out to Minnesotans below a certain income threshold, provide a larger state child or dependent tax credit and boost the state's student loan tax credit to $5,000. Those proposed additions were voted down.

Nelson noted that she planned to bring a second tax bill this year that could include additional credits and rebates.

Republicans on the Senate floor voiced their support for the proposal and said lower- and middle-income Minnesotans would see the greatest tax relief by percentage. Minnesotans paid into the state's budget surplus, the Republicans said, and now, they've asked to get a piece of it back.

“We’ve heard loud and clear from people all across the state is, ‘Give the money back,'" Senate Majority Leader Jeremy Miller, R-Winona, said. “We feel that it’s very very important to put more money in the pockets of working Minnesotans every single paycheck."

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MORE FROM DANA FERGUSON:

Follow Dana Ferguson on Twitter  @bydanaferguson , call 651-290-0707 or email  dferguson@forumcomm.com.

Dana Ferguson is a Minnesota Capitol Correspondent for Forum News Service. Ferguson has covered state government and political stories since she joined the news service in 2018, reporting on the state's response to the COVID-19 pandemic, the divided Statehouse and the 2020 election.
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