Tax deal represents a missed opportunity
Gov. Walz and legislative leaders in the state House and Senate announced the outline of a budget deal Monday morning. Fox 9 reports: The agreement calls for $4 billion in…
Today, Minnesota’s Senate Republicans released their plan for what to do with the state’s forecast budget surplus. They propose to reduce the first-tier income tax rate from 5.35 percent to 2.80 percent and eliminate the state’s tax on Social Security benefits. “If passed,” they said in a statement, “the changes would be the biggest tax cut ever and provide $8.51 billion in tax relief to taxpayers over the next three years.”
The cut in the lowest income tax rate is to be welcomed. As we noted in our new report It’s Our Surplus: Give It Back!: The case for permanent tax cuts for Minnesotans, Minnesota’s lowest personal income tax rate is higher than the top rate of 24 states. The Senate Republican’s statement says that:
Under the Republican proposal, a Minnesota family making $100,000 would see a tax savings of $1,000 each year. A typical individual making $37,000 would receive about a $500 annual reduction. Under the Governor’s tax proposal, the same family would receive one $350 check, and an individual filer would receive a $175 check, with no long-term savings or reductions.
While we would urge lawmakers to go further in cutting the state’s income tax rates, it is undoubtedly true that this measure is preferable to Gov. Walz’s insulting plan to send each Minnesotan a check for $175 with his name stamped all over it. For context, this will pay for you to fill a 16-gallon tank just 3.2 times.
Indeed, further tax rate cuts should be prioritized ahead of cuts to the taxation of Social Security income. Fox 9 reports that the Senate GOP proposal:
…would benefit 410,000 retirees with an average savings of $1,313 per year, nonpartisan legislative researchers estimate. It would eventually cost Minnesota more than $600 million a year in lost tax revenue. Minnesota would join 37 other states that do not tax Social Security income.
About 55 percent of Social Security recipients do not pay Minnesota’s tax because the state already exempts $5,500 of benefits, nonpartisan House researchers have estimated.
The Senate GOP’s proposal isn’t ideal, but it is the best offer to have emerged from the Capitol so far.