Deal reached on bill that eliminates taxes on Social Security income

The Minnesota Capitol under a cloudy sky
Lawmakers reached a deal on a tax bill Saturday afternoon, but there was little progress reported on other key issues.
Tim Pugmire | MPR News

Updated 4:20 p.m. Saturday

Negotiators reached a deal on a tax bill Saturday afternoon at the state Capitol, but other big issues remained unresolved as the clock ticked toward a midnight Sunday deadline for passing legislation.

“This is the largest tax cut by far in the history of this state,” said House tax chair Paul Marquart, DFL-Dilworth.

“We have put together a terrific tax bill,” said Senate tax chair Carla Nelson, R-Rochester. “The most significant, largest tax relief in the history of our state. And it couldn’t come at a better time. Minnesotans are struggling.”

Nelson said a major piece of the bill is eliminating state taxes on Social Security income.

“Minnesota seniors are never again going to see their Social Security checks taxed,” she said.

The change will affect 460,000 seniors, Nelson said.

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A conference committee spreadsheet that was briefly available online showed the elimination would cost $510 million in the first year and $1.1 billion in the next two-year budget cycle.

The bill also cuts income taxes for 2.6 million Minnesota tax filers. Specifically, the spreadsheet showed the bill reduces the first bracket income tax rate from 5.35 percent to 5.1 percent at a cost of $277 million in the first year.

A man and a woman in front of a blue background
Rep. Paul Marquart, DFL-Dilworth, and Sen. Carla Nelson, R-Rochester, spoke to reporters Saturday afternoon about the details of an agreement on a tax bill.
Tim Pugmire | MPR News

There are no direct tax rebates, such as the “Walz checks” proposed by Gov. Tim Walz, included, but the bill features a child and dependent care credit and expands the K-12 education credit, which House negotiators said will send money to parents of young children.

The bill also adds $373 million in tax relief for renters, and moves the time to file from that relief from summer to the April 15 income tax deadline, which Marquart said would make more people aware than the credit is available.

He said the total amount for property tax cuts in the bill is $600 million.

Because tax legislation must originate in the House, it is likely that other spending bills would have to pass before the tax bill would come up for a vote. Nelson urged legislators negotiating spending bills not to hold the tax bill hostage.

Lawmakers have until midnight Sunday to pass bills, and big disagreements remain on some bills, including education and public safety. 

Republican Senate Majority Leader Jeremy Miller also urged negotiators to make deals.

“It’s crunch time right now. Time is short,” Miller said. “So, if this is going to get done, it has to get done as quickly as possible,” Miller said.