Bill to eliminate Social Security income tax has DFL authors

The Minnesota House Tax Committee heard two bills Thursday that would either partially cut or fully eliminate the state taxes that Minnesotans pay on Social Security income.

One bill (HF 300) would fully eliminate the state tax on Social Security income while the other (HF 1040) would exempt 80% of Minnesota seniors from paying state taxes on their Social Security benefits.

It’s been a hot-button issue dating back to last year’s session. Gov. Tim Walz, a Democrat, supported eliminating Social Security income taxes last year in a tax deal with Republicans that later fell apart. This year he has only proposed a partial elimination of those taxes.

The bill that would eliminate 100% of the state income tax on Social Security got the most attention Thursday.

“The time to stop taxing the hard-earned Social Security benefits is now,” said Rep. Dave Lislegard, DFL-Auruora. “With the unprecedented budget surplus in Minnesota we have an historic opportunity to eliminate this tax.”

He said it was the number one issue he heard about on the campaign trail last fall. His bill has a dozen DFL co-authors, although DFL leadership in the House and Senate is opposed because they say it would cost the state more than $500 million in revenue each year.

Republicans say that money would be better off in the bank accounts of taxpayers.

“We have to make the discussion who is going to spend that money better?,” said Rep. Chris Swedzinski, (R) Ghent. “Either the 349,000 individuals that are currently paying taxes on Social Security or the 201 legislators in Minnesota?”

Several testifiers say taking that much money out of the state budget would hurt the state’s ability to pay for everything from services for the elderly to early childhood programs and many services in between.

“I don’t want this tax cut,” said retired Dr. Aleta Borrud. “I don’t need this tax cut. I oppose HF 300 because we cannot bankrupt our future ability to provide for the care of every older person who needs help.”

A day care provider from Fergus Falls who described herself as a senior citizen also opposes the bill.

“House File 300 will decrease the amount of funds available for early childhood, but will allow seniors who have a high incomes to pay little or no taxes on them,” testified Nancy Jost.

But a volunteer representative of AARP says he supports the bill.

“We believe now is the time to stop taxing these benefits,” said Bill Raker. “Social Security is an earned benefit. Historicall, Social Security was designed as an anti-poverty program, not a way to fund state governments.”

Just before the tax committee’s meeting, a group of Minnesota seniors spoke out against full Social Security tax elimination.

The nonpartisan House Research Department says more than half of all Minnesota households that get Social Security benefits currently don’t pay any state taxes on those benefits.

Lislegard’s bill also makes a portion of public pension benefits exempt from state income tax. Many of those pension participants are not allowed to be part of the Social Security system.

Debate on the Social Security taxes will resume next week in the House Tax Committee.