Minnesota lawmakers are again considering legislation to get rid of the state tax on Social Security income.
The House Taxes Committee held a hearing Wednesday on two versions of the bill. One (HF9) would phase out the tax by 20 percent per year for five years. The other (HF213) has a 10-year phase out at 10 percent a year.
Rep. Dale Lueck, R-Aitkin, is the sponsor of the faster plan. Lueck said the clock is ticking for senior citizens who could use a tax break.
“Everything else is stagnant or going backwards for these people,” Lueck said. “If we spend a lot of time here continuing to jaw on this for a couple of sessions, there’s a whole ‘nother crop of them are going to die before we actually provide any relief.”
Rep. Kathy Lohmer, R-Stillwater, said the Social Security tax is the issue she hears about most from constituents. Lohmer said too many senior citizens are moving out of Minnesota to avoid the tax.
“These people have been productive and valuable citizens of Minnesota, and they leave behind children, grandchildren, neighbors and friends,” Lohmer said.
The Minnesota Department of Revenue estimates the cost of the bills would eventually top $1 billion in each two-year budget cycle, with half of the benefits going to individuals with incomes over $100,000.
Paul Cummings, the department’s tax policy manager, said the legislation was a “poorly targeted approach” to providing relief to seniors in need.
“This proposal does not benefit all seniors. It primarily benefits wealthy seniors,” Cummings said.
Under current state law, Social Security benefits are tax exempt for individuals making less than $25,000 and married couples making $32,000. Slightly higher incomes get as much as a 50 percent exemption.
Rep. Paul Marquart, DFL-Dilworth, said the proposed phase out of the Social Security tax is not affordable. He said a more realistic approach would be to adjust the exemption levels.
“If you were to move that up to about $60,000-$70,000 that would be the targeted relief that we can afford,” Marquart said.
DFL Gov. Mark Dayton has said he’s willing to consider adjustments to the exemption incomes.
The committee took no votes. Both bills will remain under consideration for a larger tax bill this session.