Tax breaks for seniors, veterans advance in Minnesota House
Minnesota House Republicans went to work Tuesday on their pledge to give back to taxpayers a majority of the state's nearly $1.9 billion budget surplus.
Minnesota House Republicans went to work Tuesday on their pledge to give back to taxpayers a majority of the state’s nearly $1.9 billion budget surplus.
Members of the House tax committee heard several GOP-backed bills to exempt Social Security income from state taxes.
There are five similar House bills that would phase out the taxes senior citizens pay on their Social Security income.
Rep. Kathy Lohmer, R-Stillwater, said her bill would help keep retirees from leaving Minnesota.
“These same people who’ve lived here all their lives, raised families, been productive and valuable members of their communities are now having to choose to leave neighbors, friends, children and grandchildren because of the taxes they’re being asked to pay,” Lohmer said. “Whether we like it or not, it’s happening. Personally, our family has a half a dozen friends who have already left.”
Lohmer’s bill would reduce the Social Security tax by 10 percent each year until the full exemption is reached.
Rep. Dale Lueck, R-Aitkin, is proposing a faster, five-year phase-out.
“When you’re sitting on a fixed income, and a piece of it is Social Security, you’ve got nowhere to go except to start pulling things out of your budget,” Lueck said. “So, this is an opportunity to very rapidly, very simply put some dollars back in our senior citizens’ pockets.”
Social Security benefits are already exempt from state and federal taxes if an individual’s annual income is under $25,000. The threshold is $32,000 for married couples filing jointly.
Rep. Dianne Loeffler, DFL-Minneapolis, said a majority of Minnesota senior citizens aren’t being taxed.
“This bill wouldn’t help them. It would help the higher-income seniors that exceed that threshold and have above average earnings for a retiree,” she said.
The proposed reduction could affect an estimated 381,000 tax returns in 2016. The cost to the state in lost revenue would grow each year of the phase-in.
Rep. Ann Lenczewski, DFL-Bloomington, said she’s open to considering the tax break. But she cautioned that its price tag will eventually reach $500 million per year.
“I think that’s OK if people want to figure out how they’re going to permanently cut state spending to come up with that money,” Lenczewski said.
The bills were laid over for possible inclusion in the House omnibus tax bill.
The committee also advanced a measure to exempt military retirement pay from Minnesota’s income tax. The proposed tax break would be phased in over five years.
Rep. Bob Dettmer, R-Forest Lake, said his bill would generate revenue from veterans retiring in Minnesota.
“They’ll be maybe starting businesses,” Dettmer said. “They’ll hire other people. They’re going to buy homes. They’ll buy vehicles.”
House Republicans are also pushing a package of tax breaks for businesses, which they included in their first bill introduced this session.
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