SAINT PAUL, Minn. – Today, the House Taxes Committee held a public hearing on legislation authored by Rep. Dave Lislegard (DFL – Aurora) to exempt social security payments from state income taxes in Minnesota. Rep. Lislegard also presented a bill to make certain public pension payments tax exempt.
“Once seniors finally leave the workforce to enjoy hobbies, traveling, and time with family, taxing their Social Security benefits is the wrong approach. It’s time we come together to eliminate the income tax on Social Security payments in Minnesota,” Rep. Lislegard said. “Minnesotans frequently, consistently, and loudly tell us they want to see action on the Social Security income tax. We have a golden opportunity at our doorstep to protect the economic security of Minnesotans living in their golden years.”
Minnesota is one of only twelve states to tax Social Security benefits, impacting roughly 352,000 seniors. In recent years, there has been incremental progress toward eliminating the tax, including the creation of the income-based Minnesota Social Security Subtraction in 2017. Over the years, lawmakers have resisted adopting a full exemption due to its high cost to the state’s balance sheet: an estimated $509 million per year. However, with a $9.25 billion budget surplus, Rep. Lislegard thinks this is the session to eliminate the Social Security income tax once and for all.
“As someone who strongly supports fiscally responsible budgeting, I completely recognize the significant hit to the general fund this bill would bring,” Rep. Lislegard said. “This year though, with a historic budget surplus, cost shouldn’t be the roadblock to getting this done for our seniors. Exempting Social Security payments from state taxes will help all seniors live comfortably in Minnesota while paying property taxes, paying sales taxes, volunteering in the community, donating to charities, and generating economic activity right here at home.”
Ida Rukavina, Executive Director of the Range Association of Municipalities and Schools, spoke in support of the bill.
Rep. Lislegard also presented a similar bill to exempt certain pension income, currently 100% taxable, from state income taxes. The bill establishes a state subtraction for pension benefits applying to state or federal pension plans whose members don’t qualify for Social Security benefits. The subtraction is modeled after the federal and state tax preferences for Social Security income. Eligible recipients include the State Patrol Plan, the Teachers Retirement Association, the Public Employees Retirement Association (including educators, police officers, and firefighters), and others.