Minnesota is one of seven states that offer no tax breaks on Social Security income.
But that might not be the case for long.
Lawmakers are weighing no less than five different bills that would phase out the state’s tax on Social Security benefits.
From the Echo Press:
A Minnesota House committee dealing with aging Minnesotans voted Wednesday to phase out the tax the state charges on Social Security benefits.
The House Aging and Long-Term Care Policy Committee sent five bills to get rid of the tax to the Taxes Committee.
The bills all eliminate the tax, but differ in their timelines for phasing out the tax.
One bill, called the Retire in Minnesota Act, would reduce the state’s tax on Social Security income by 10 percent every year until the tax is phased out entirely.
The bill is supported by Republicans in the Senate. But Democrats will need to sign on to the bill if it’s to have any hope of passing; Republicans only control 28 Senate seats, while Democrats control 39.
The various bills would all put more money in the wallets of seniors to the tune of $600 per retiree – but they would also cost the state hundreds of millions of dollars in lost revenue.
Republicans acknowledged the significant revenue losses. But they countered that the revenue losses could be offset by the money spent by seniors who end up staying in Minnesota due to the tax break, as opposed to leaving for another state.
From the Star Tribune:
Although leaders acknowledge it will reduce seniors’ contributions to state’s coffers—by $127 million in the next two years alone—that loss will be made up by the seniors who stay in the state and contribute to the economy.
“When they (stay), they spend money on movies, restaurants, theaters, they take the grandchildren with them, they give to local charities and pay property taxes,” said the bill’s co-author, Sen. Mary Kiffmeyer, R-Big Lake. “There’s a lot of revenue, that if you don’t do this, you’re going to hear the great big giant sucking sound of the southern states pulling our boomer retirees.”
[…]
Although they had no immediate estimates on state revenue lost by seniors who leave the state, the bill’s chief author, Sen. Dave Senjem, R-Rochester, said they were confident that those who would stay because of the tax break would pay for the cost to state coffers—and it won’t be cheap. The proposal is projected to cost $398 in 2017, $437 million in 2018 and $477 million in 2019.
The Retire In Minnesota Act can be read here.
Photo by Teresa Boardman via Flickr License
