ST. PAUL, Minn. (WCCO) — The Minnesota Senate on Thursday approved cutting income taxes and eliminating taxes on social security benefits in a GOP-backed $8.4 billion bill, legislation that’s more expansive than a dueling House DFL plan and leaves out one-time direct payments that Gov. Tim Walz sought to pass.
The first-tier income tax rate would decrease from 5.35% to 2.8%, which impacts 2.4 million filers. Minnesotans making between $150,000 and $249,000 will see the largest tax benefit, according to nonpartisan Senate research staff analysis.READ MORE: Minn. Legislature Misses Deadline With Key Bills Unfinished; Walz Suggests Special Session
For example, a single filer making between $50,000 and $75,000 a year would see on average a $713 tax reduction, according to the analysis.
Among all taxpayers, more than 80% will see some sort of tax reduction, according to the analysis. The remainder would see no change.
Republicans say the projected $9 billion budget surplus is a sign the state is taking too much from Minnesotans and they want taxpayers to see a reduction every paycheck, not in one-time tax rebates. They tout the legislation as a the largest tax cut in state history.
“Our state coffers are full yet Minnesotans are struggling. They’re struggling with historic inflation and they’re just struggling to make ends meet, to keep the energy on in their homes, to fill up their cars, to buy groceries,” said Sen. Carla Nelson, R-Rochester. “All of these prices are increasing dramatically. And it is just bad tax policy that we would over-collect to such an extent.”
House Proposal Focuses On Targeted Tax Credits
It passed the Senate 42-24 with six Democrats joining Republicans in supporting it, but it’s unlikely to get taken up in the DFL-controlled House, which has its own proposal. Both chambers will be forced to broker a compromise.
In their bill, House Democrats don’t cut tax rates, but instead include one-time rebates of $325 per child under 17, which could be sent to qualifying Minnesotans as soon as this summer, said Rep. Paul Marquart, DFL-Dilworth, chair of the tax committee.
There are also tax credits of $3,000 per child under five capped at $7,500 in total tax credits. The proposal also eliminates taxes on social security with income caps, increases a tax credit for student loans, and boosts housing credit programs, among other provisions.
“We think the bill we’re presenting takes those dollars that we have in a very targeted and significant way and gives our young families, our workers our seniors citizens—those who need it the most,” said Marquart.
No ‘Walz Checks’ In Either Plan
Missing from both bills is the pitch from Gov. Tim Walz to send so-called “Walz checks,” one-time payments of $500 per individual and $1,000 for married couples. Marquart said the child tax credit rebate is similar to Walz’s plan, but a more targeted approach to help families.
“It’s the same idea,” he said. “It’s a one-time payment, get dollars immediately out to families. The difference is we are going to dependents, governor is going to individuals.”
He added the scope of their rebates to parents shrinks the total spending: Walz’s plan for direct payments would cost $2 billion, whereas the total DFL tax proposal over multiple years is about $3.2 billion.
When asked during a GOP news conference Thursday morning about the prospect of a similar one-time rebate resurfacing, Nelson said that it’s going to be “a hard row to hoe” because neither chamber included the proposal in their tax package.MORE NEWS: Minnesota’s Big Breweries To Sell Growlers Again, Smaller Breweries Can Sell 6 Packs To-Go Under New Law
“We’re interested in real, ongoing, permanent tax relief, not a one-time check in the mail,” she said.