Gov. Tim Walz and top DFL leaders this week criticized the idea of eliminating a state tax on Social Security benefits despite the fact that many Democrats campaigned on it in critical swing districts that gave the party full control of state government.
Walz said he would push to reduce the Social Security tax for more people in Minnesota, where a majority of seniors are already exempt. But the governor said fully eliminating the tax — a policy that Walz agreed to in a compromise deal with Republicans earlier this year — would benefit the wealthy.
“The only thing I can pledge you for certain around taxes is I will not be proposing a tax cut for the wealthiest of Minnesotans,” Walz said at a news conference Tuesday. “I don’t know if the richest Minnesotans, billionaires, need a tax cut on Social Security, but we can have that conversation.”
Incoming Senate Majority Leader Kari Dziedzic, DFL-Minneapolis, and both House Speaker Melissa Hortman, DFL-Brooklyn Park, and new House Majority Leader Jamie Long, DFL-Minneapolis, echoed Walz’s argument.
“I’m on the record for having deep concerns about that,” Dziedzic said at the news conference. “It’s about $500 million a year.”
The comments drew a sharp response from a few newly elected Democrats joining the narrowly divided state Senate where the DFL will have a one-seat advantage. They had joined Republicans on the campaign trail in promising to make a repeal of the tax a top budget priority.
“Not only does it burden many of Minnesota’s seniors, it also leads to retirees leaving the state for others where this benefit is not taxed. This is unacceptable,” said incoming DFL Sens. Rob Kupec of Moorhead, Heather Gustafson of Vadnais Heights, Judy Seeberger of Afton and Grant Hauschild of Hermantown in a joint written statement.
And another Greater Minnesota DFLer, Sen. Nick Frentz of North Mankato, said Wednesday during a legislative preview that he’d also support repealing the Social Security tax.
“There is room for tax relief,” Frentz said. “I personally would vote yes on a full repeal of Social Security taxes.”
Who benefits from repealing the state Social Security tax
Only a few months ago, in May, DFL leaders agreed to fully eliminate the Social Security tax as part of a deal struck with Republicans in May to pass a $3.88 billion tax bill. At the time, the GOP had a majority in the state Senate.
The price tag for repealing the Social Security tax would have reduced Minnesota tax collections by $509.6 million in 2022 and by $1.12 billion in the following two-year budget.
Social Security benefits are taxed by the federal government depending on a taxpayer’s overall income. About a dozen states collect taxes on Social Security, though Minnesota and others exempt people at lower income levels.
Right now, about 55 percent of the roughly 400,000 people who receive Social Security in Minnesota don’t pay taxes on the benefits. The bulk of the elimination would help taxpayers who have $100,000 or more in total income, according to a Senate analysis.
That Senate research found people with incomes between $50,000 and $75,000 a year would save an average of $733 per year. Those making more than $500,000 would save $2,397.
But the deal, which Walz praised on the campaign trail, fell apart over broader disagreements on spending Minnesota’s large budget surplus. In an economic forecast released at the Capitol on Tuesday, state officials estimated that surplus at a whopping $17.6 billion.
The GOP has long pushed to repeal the Social Security tax. Republican lawmakers have argued that seniors deserve the benefits after paying into the program for years. And some say it would help keep seniors from leaving Minnesota for friendlier tax environments.
DFL disagreement
A contingent of Democrats like Walz have proposed exempting more seniors from the tax, but many have opposed fully repealing the tax because of its benefits to wealthy retirees.
Some DFLers, however, have argued for getting rid of the tax altogether.
That includes a handful of Democrats who won key legislative seats that helped give the DFL control of the House and Senate.
Incoming Sens. Kupec, Gustafson, Seeberger and Hauschild said voters care about the issue, and they promised eliminating the state tax on Social Security will be their “top budget priority going into the legislative session,” especially after the “historic budget forecast announced yesterday.”
In the House, some DFL candidates like Rep. Dave Lislegard of Aurora also campaigned on the issue. Democrats will have a narrow majority in that chamber, as well.
Incoming House Minority Leader Lisa Demuth, a Republican from Cold Spring, told reporters that lawmakers should end the tax “across the board.”
“That’s what we talked about on the campaign trail,” she said.
But Walz said Tuesday that when people have lots of retirement income, the “impact of that Social Security tax is almost unnoticeable to the folks making that much.” He also said revenue from that tax “goes back into delivering for seniors.”
Like Walz, Dziedzic, Long and Hortman said repealing the tax is not fully out of the question. Lawmakers will still have to meet and debate the issue to see if there is enough support for such a policy. “As caucus leader I will lead the discussion with our caucus and we will make that decision jointly,” said Dziedzic, who acknowledged it was a campaign issue for some incoming lawmakers.
At a legislative preview panel on Wednesday, Hortman said there is bipartisan support for eliminating the state tax on Social Security, and she said the issue could help make Minnesota more competitive with other states in keeping or attracting retirees. “We’ll certainly take a look at that, it’s in the mix.”
But Hortman also said spending on paid family leave, child care and increasing pay for people in “our care sectors” are higher priorities. And she said she’s inclined to help a young teacher making $36,000 a year rather than cutting Social Security taxes for a millionaire. Eliminating the tax “right now in Minnesota, that largely means we would be giving a tax cut to wealthier people who are not at the peak of their spending on child care and housing and all of the other things that go with that,” Hortman said.
“What is the right investment for the state of Minnesota?” Hortman said. “What’s going to be returned into the economy the most? Who needs it for child care, who needs it for housing?”
There are those who still – who deny the science- that the DFL is the party of “tax and spend.”
Apparently you missed FL GOP Senator Rick Scott’s plan for the hoped for majority in 2023.
Look it up, then get back to me. You’re wrong, dude.
There are still plenty of conservatives – who despite the science over four decades now – still believe in trickle-down economics.
The DFL, the party of big government, insists that they need that money more than your grandmother does. That’s just who they are.
No worries, allow me to do the edits that turn your mistakes into fact.
“The DFL, the party that cares about the quality of life of all Minnesotans, insists that the needy, our climate, infrastructure, etc. need that money more than your billionaire grandmother does. That’s just who they are! “
You tax your old people, do ya? Any of them? They haven’t done enough to keep your state stable and solvent and free for decades?
Thanks for the latest reason to be glad I don’t live there.
We need the money
There should be equity in the taxation of Social Security benefits in Minnesota. Why the feds haven’t raised the cap on contributions I’ll never understand. The income growth at the top (the top 10 percenters) is exponential while lower and even middle income taxpayers barely keep up with inflation. So repeal of SS income tax should be scaled with lesser taxation to lower income Minnesotans. This shouldn’t be a political problem; it should resonate across the state with voters in both parties.
Yes, absolutely raise the cap on contributions for Social Security. All of the level-headed well to do that I have ever conversed with acknowledge that the raising of this cap would effect minimal changes to their day to day, while solving the concerns overall about solvency.
I am fully of the mindset that conservatives want this concern to stick around just so that they can keep using it a “look at how govt. does not work issue”.
James,
Only change it by six years.
https://www.heritage.org/social-security/report/the-impact-removing-social-securitys-tax-cap-wages
Using a partisan linked report that is 23 years old? Man use an update!
I trust the Heritage Foundation as much as I trust a meth dealer.
And why, indeed, make taxation less progressive?
We have a graduated tax code, so why not exempt the tax for a certain income level, but use inflation to raise that level?
The first limit when Federal taxation of Social Security starts, was set at $32,000 for a joint return in 1984. If that had been indexed for inflation, it would be over $90,000 now and the second (85% taxable) limit would be even higher. The tax now hits middle class seniors that weren’t hit when it was first implemented. By not indexing for inflation, it becomes more regressive every year. Eventually, without a change, it will be taxed for lower income seniors for whom Social Security is their only income. The state tax just piles on top of the Federal and also becomes more regressive over time.
Combine this proposal with a child tax credit, as at least we could take children out of poverty, rather than give all tax break money to wealthy seniors. Children and their low income parents need help – those in need should be our priority.
Hey, Mom, I’m trying to get your grandkids through college. Why you tryna raise my taxes?
Typical bait and switch tactic by the DFL. They made unconditional promises and are now reneging. Walz does not think billionaires need the tax cut and I will agree on that point but my wife and I are far from being billionaires and we could surely use that tax cut.
Did you read the article carefully? Walz and other leaders are all in on increasing the percentage of recipients who don’t pay taxes, likely including you. Those DFL’ers who campaigned on a total end of SS tax still feel that way.
No reneging happening here. Sure, the Democrats were willing to compromise to pass a previous bill containing stuff they wanted, but that didn’t work out.
Are there actually people on here who favor billionaires or even those earning $500,000 a year getting a tax cut? How many of those would move to Florida out of spite in having to pay an extra $2,000 per year in SS taxes?
Seriously?
I hope the four Freshman (Freshwoman…Fresh person) DFL senators stand their ground for the relief for us Senior citizens. I’ve paid taxes in this state for 55 years. $17,000,000,000. Some people are being overtaxed, not just us Seniors. Give it back. I won’t even say “please ” as it is our money they are holding on to.
First year legislators have very little power to set the agenda. They don’t control any committees. At best they’ll be able to vote the final bill up or down. I can’t see them voting down other tax relief because it doesn’t help wealthy senior citizens more.
They newcomers will toe the line and it is unlikely that there will ever be a vote. The State cannot possibly afford to watch $500 million disappear per year with the new spending that is planned.
Cites please. And though Ryan Winkler insists that Minnesota will lead the nation in cannabis legalization, I still vaguely remember the MNSure rollout, the fabulous DVS rollout, the wonderful oversight of COVID money for school lunches, etc. If the taxes easily generate $500 million per year (which won’t be needed as the DFL will not eliminate the SS tax) the black market will continue to thrive as it has in other states that aren’t Minnesota.
You forgot the edibles legislation….. sloppy work at best. Seems the recurring theme is “if we touch it we break it.”
Again you don’t account for the increased expenses related to legalization of an addictive drug. How many years did it take to make an impact on tobacco usage?? What was the cost in lost lives, but idiots appear again to look the other way to justify their own weaknesses. Just like winkler a known pot head, it’s all about me me and of course me. DFL, never a tax reduction, even if it amounts to double or in MN triple taxation. Individuals appear to not understand that these funds were taxed prior to forced contribution on funds which were never invested and were much more valuable than their current dollar value. Those who attempted to prepare for their own retirement are taxed on their preperations and funds used by the democRATS to buy votes. What would ever happen if the democRATS had to justify their spending of MN citizens money. I remember wellstone saying ” I know better what you want and need, that’s why I voted as I did.” The logic of the left.
The tax on benefits started in the mid 80’s during the Reagan years. The last time the taxable rates were updated was in the early 90’s. Just my opinion but why not update the rates to the 2020’s that way some people would still be taxed but most would not. It would be an easy update for the state to implement.
Social Security benefits’ taxable percentages haven’t been indexed,true.
But, the benefits themselves are indexed to inflation; every year they get bigger (we’ve had about an 8.7% increase in benefits for 2023). And both federal and state tax rates are indexed frequently, so they are not as high for those with lower incomes, reflecting inflation. The system is calibrated not to punish recipients of Social Security, or any taxpayers. That’s non-regressive taxation. Lots of us Minnesotans really like the system
Hard to see why we’d need to index the percentage of SS benefits that are taxed, too; that favors only the wealthy.
If 55% of those who receive SS or SSDI are paying taxes on their benefit, that means 45% are not. Despite the fact that 55% is greater than 45% this article (and the DFL) still maintains most recipients do not! What?
I suspect the Governor, the Legislature and the author of this article are capable of doing basic math. This is blatant double-talk!
“Right now, about 55 percent of the roughly 400,000 people who receive Social Security in Minnesota ***don’t*** pay taxes on the benefits.”
No double-talk going on here, you just read too fast and missed a word.
It is completely astounding how such limited thinking takes over when money is under debate by the state. You focus on how the rich will get richer by eliminating the tax. The tax doesn’t really impact the rich as it does to poor. The trade-off who be to legalize cannabis and replace the lost Social Security “taxes” with taxes on the cannabis industry.
It “would be…” nice to have an edit feature as well. 🙂
Being one of 12 states that tax SS funds seems to be a bragging point to DFL. Governor Dayton had to be talked out of raising state taxes during his term, 9.85% not high enough? Again Minnesota trying to be more big Government liberal than California…. Oh boy!!
I thought this part of the quote was interesting: “it also leads to retirees leaving the state for others where this benefit is not taxed”
Is it okay that I don’t care if retired people move away from Minnesota? It might actually be a long-term benefit when it comes to the state budget. We’re already desperate to find health care workers for nursing home facilities with tens of thousands of open positions. If other states want to import the cause of their health care system collapse we should let them. That doesn’t mean we should make fiscally irresponsible decisions in this state.
I think retired people in MN need to choose: do they want high quality services or lower taxes? I think MN should be the high quality services state and if they want to choose lower taxes and limited services they can move somewhere else. It is unsustainable to provide BOTH high quality services AND lower taxes for retirees.
I agree completely Dan. Some people forget that most people over 65 get lots of services from the State that they should help pay for. I think it is much better to target tax reductions based on incomes. I feel strongly we need to continue to reduce property taes for older, lower income Minnesotans.
I had an immediate nasty thought, knowing that currently, 95% of Covid deaths are deaths of people over 65 years of age: Think what would happen to our Covid statistics, if our retirees would just go off to Florida to live and not get vaccinated or taxed on their Social Security benefits! They could burden Florida’s healthcare system and Covid stats, and Florida’s tax base. And Minnesota would look greater by comparison
Second: Would anyone, in these years of visible, palpable climate-change-caused disasters, want to go to Florida, or Arizona, to live out their retirement years? California and Arizona, and the undertaxed West in general, are going up in flames and dying off from drought (climate-change-caused), and Florida, like southern Louisiana and the coast of Alaska (also no income tax there) is being taken back into the ocean, where water levels are leaping up. [Have you been in Miami lately? Watching the water creep up, even on “dry” days, is an amazement: the seawater is seeping up over the land and clawing it away–even without hurricanes!]
Minnesota is looking nicer and nicer, from a comparative climate viewpoint. That’s going to be more important than a dinky tax on SS benefits in future years.
I thought Minnesota eliminated taxing Social Security income back in May? I was happy to see this happen, but now we are changing our minds! Incredible! This means we will still be taxed twice on Social Security even when we have a surplus! Wow! What a work of art legislators are that support double taxing the retired in our state. Pretty sad to see!
I’m on Social Security and can see a reason why Social Security is taxed despite a surplus. Should seniors spend down their savings to go on Medicaid for long-term care, that collected Social Security tax can ease the financial burden: both for the state and for survivors, who might be subject to estate recovery laws.
Isn’t a reasonable compromise on Soc Sec taxation that it be means-tested? Low income Minnesota Seniors probably need the tax relief more than high income Minnesota Seniors. This will be interesting to follow….
As all but @$3,300 of my annual income derives solely from a social security disability income, those campaign promises to end taxing ss would be most gratefully appreciated.
Minnesota taxes social security at the highest rate of all states (or so I’ve read)…
With my property taxes increasing, I may no longer be able to afford to keep my home, and most certainly could never find rental accommodations at the current cost of my monthly mortgage.