Minnesota State Capitol looking at west entrance by Myotus is licensed under CC BY 4.0.

With $9.25 billion in a budget surplus as well as over $1 billion from the American Rescue Plan, Minnesota state lawmakers sparred over the best way to allocate these funds. While these reforms have yet to be passed, the agreed-upon compromise would eliminate the state income tax on Social Security income, lower taxes within the first tier of income taxes, expand and simplify a credit for renters, expand a child tax credit, and slash property taxes.

The elimination of the tax on Social Security benefits marks a longstanding priority and promise of the Minnesota Republicans. Minnesota is one of only 13 states to tax Social Security at all. Proponents of eliminating the tax argue that abolishing it helps seniors and removes a reason for retirees to flee the state. They also note that taxing Social Security income amounts to double taxation as those benefits were taken from taxpayers in the first place. Overall, abolishing the tax is a relief to Minnesota taxpayers and retirees.

The bill also reduces the lowest income tax tier from 5.35% to 5.1%, a much smaller decrease than a cut to 2.8% as called for by Senate Republicans. Thirdly, the proposal includes an expansion of a tax credit for renters. It would shift the credit into the income tax filing, which would both expand eligibility and increase the number of taxpayers who would claim it by tens of thousands. Lastly, the proposal increases the homestead property tax refund, includes a tax credit to families with young children, expands the K-12 education tax credit, and extends the historic preservation tax credit.

Unfortunately, the Minnesota lawmakers could not come to an agreement by the Sunday night deadline. While the Senate GOP and House DFL agreed upon the tax deal in conference committee, some legislators in the House are holding this essential relief hostage to try and force their big spending agenda through the GOP-controlled Senate. The billions of dollars would then remain with the state government rather than in the hands of the taxpayer.

Despite this setback, Americans for Tax Reform commends this victory by the Minnesota Senate Republicans and encourages House Democrats to pass this much-needed tax relief for Minnesotans. 14 states have recently passed income tax cuts, and while a .25% decrease is laudable, Minnesota lawmakers should continue to decrease taxes to become more competitive and leave more money with taxpayers. As states rake in record budget surpluses and taxpayers reel from rising costs and an uncertain economic outlook, it is a prime opportunity for lawmakers to pass lasting tax reform. Americans for Tax Reform urges state lawmakers to resist the impulse to balloon government spending and instead to pass long-term reforms for a freer and more prosperous America.