Last spring, GOP and DFL leaders in the Minnesota Legislature announced they had reached a deal with Gov. Tim Walz that included doing away with the state’s tax on Social Security checks.
Across the Gopher State, hundreds of thousands of seniors and countless soon-to-be seniors cheered. We were finally joining all of our neighboring states and 39 states in all in not taxing the monthly checks of those on fixed incomes. We would no longer be an outlier. We’d acknowledge there is a tax too distasteful and too cruel.
The cheering didn’t last long.
Like so much else doomed by election-year politics and left undone last year by lawmakers, the deal — even though it was the result of compromise and common sense — was never passed. And this year when the governor proposed his budget, he didn’t include it. Headlines this legislative session now refer to repealing Minnesota’s state tax on Social Security as a “sticking point” and matter of debate and contention.
Unreal.
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Or, for tax-happy Minnesota, as expected?
“Both Republicans and Democrats vowed to end this tax once and for all. This should be bipartisan,” Rep. Natalie Zeleznikar of Fredenberg Township, whose House District 3B includes Hermantown, Proctor, and the far-western reaches of Duluth, said in an exclusive statement this past week to the Duluth News Tribune Opinion page. “With a $17 billion surplus, it is ludicrous to not end this tax.”
On Thursday, Zeleznikar introduced a bill in the House to do just that.
“We are taxed enough in this state, and this, as well as property-tax reform, is the least that can be done. Then get $4,000 checks back to all taxpayers who paid taxes asap. They deserve to have some of their money back. It is their money to begin with,” the freshman Republican lawmaker continued. “A $17 billion surplus does not mean spend it all and then tax more. That will not help advance Minnesota.”
But “spend it all and then tax more” is precisely where things seem to be heading in St. Paul this session. As a Duluth News Tribune editorial pointed out last week, the governor’s proposed budget would increase state spending by 25% or more, would increase the capital gains tax (leaving Minnesota with the highest such tax rate in the nation, according to the Minnesota Chamber), and would set a higher top tier of income tax of 12.5% (making Minnesota second in the nation in state income tax, behind only California, according to the Center of the American Experiment in Golden Valley, Minnesota).
Perhaps most painful to the pocketbook of all: Walz proposed a 0.7% payroll tax on all employers and employees in the state — a new $1 billion tax — to pay for a new $40 million state-run program to guarantee paid time off to Minnesota workers. That’s even though 80% of employers in the state already provide the benefit, according to the Minnesota Chamber. And most of the workers in the state not receiving it are part-time, seasonal, temporary, or in another position that historically hasn't received such a benefit and shouldn’t expect to.
Making it worse, if the $1 billion isn’t enough to run the program, the state can raise the tax. There’s no cap on the payroll tax in the governor’s proposal, according to a fact sheet from United for Jobs. Other states with such programs exempt small businesses and seasonal workers, both of which are plentiful in the Northland. The Minnesota proposal does not.
On top of all that, Minnesota continues to tax its seniors’ Social Security. Repealing the tax would ease the tax burdens of 473,000 Minnesota filers to the tune of $1,276 each, according to a Department of Revenue estimate. That’s real money and real savings for a whole lot of us.
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No wonder a highest-in-30-years 13,000-plus Minnesotans bolted for other states in 2020-’21, as Center of the American Experiment economist John Phelan reported in a Jan. 27 column in the Duluoth News Tribune, citing Census Bureau statistics. The top landing spot for fed-up Minnesotans? Florida, which has plenty of sunshine but no income tax.
“MInnesota is a leader (amongst) highest-taxed states … (and is in the) top 10 states for outbound migration,” Zeleznikar echoed. “We need to end (Minnesota’s) Social Security tax once and for all. We need Minnesota seniors to choose to stay in this state, and some will work part time to help our workforce issues. Many are leaving due to the high taxes.”
Ending the state tax on Social Security is Sen. Grant Hauschild’s “top budget priority,” the first-term Hermantown DFLer told the Duluth News Tribune Opinion page this past week. He is co-author of a Senate bill to end the tax, and to also eliminate state taxes on public-pension benefits for police officers, firefighters, and other public servants who do not qualify for Social Security in retirement.
“Our seniors and those on fixed incomes in retirement need relief,” Hauschild said. “There is no reason we should be double-taxing Social Security recipients and those on public pensions as we continue to see rising costs. Let’s provide relief so that our families can stay and retire right here in northern Minnesota alongside their loved ones, rather than moving away to a state that doesn’t tax their benefits. …
“I have already had conversations with the governor’s office and Senate leadership on the importance of this bill,” he said. “I anticipate there will be an agreement made on this issue, and I will continue advocating for a full repeal of the tax and inclusion for public pensions.”
Any agreement will need to overcome the reservations of Walz and other DFLers that mostly wealthier Minnesotans would benefit and that there’d then be less tax revenue for their spending plans.
Well, how about not spending so much? Or at least holding the line on spending? That and ending the state’s tax on Social Security certainly don’t seem too much to ask for the benefit of Minnesota seniors on fixed incomes.
This Minnesota Opinion editorial is the viewpoint of the Duluth News Tribune Editorial Board. Send feedback to: opinion@wctrib.com.
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