Tax rebates, eliminating Social Security income tax not certain despite huge surplus

With a historic $17.6 billion dollar state budget surplus, including $12 billion already “in the bank,” it would seem efforts to pass tax rebates and eliminate the Social Security income tax would easily cross the finish line in the next legislative session. Not so fast. Democrats who now lead the Minnesota House and Senate have signaled a hesitancy to do either of those things despite the fact DFL Governor Tim Walz campaigned on those issues.

“It’s no secret that it was received lukewarmly by both chambers and probably bipartisanly,” Walz says of his tax rebate plan of $1,000 per individual and $2,000 per family that failed to gain traction last session when Republicans controlled the Senate. Prospects don’t look much better this year even with the DFL now in control of the House and Senate. The same goes for eliminating Social Security state income taxes.

“He can propose his budget and we will have a thorough conversation and probably some hearings on the issue,” incoming DFL Senate Majority Leader Kari Dziedzic said Tuesday regarding the Social Security income tax issues. “Me personally? I’m on the record for having deep concerns about that. It’s about 500 million dollars a year” that would come out of the budget. Incoming DFL House Majority Leader Jamie Long echoed that concern. “There are many in our caucus who care strongly about this issue and then there are those with the same concerns Senator Dziedzic said about the overall cost,” he said.

DFL legislative leaders are also not sold on the idea of tax rebates yet. Republican House Minority Leader Lisa Demuth signaled support for both Social Security income tax cuts and rebates.

Carleton College political analyst Steven Schier says Democrat run a risk if they go against issues the DFL governor campaigned on. He says that ultimately will likely bring legislative Democrats on board.

“It then becomes almost an imperative that Democrats act on that otherwise they will be subject to a bait and switch charge,” Schier said.

Editor’s note: An earlier version of this story mistakenly reported the surplus at $17.6 million, not $17.6 billion. The article has since been updated to reflect the correct figure.”