Social Security tax cut splits Minnesota DFLers

A social security card and U.S. treasury checks on a black background.
Ideas to cut taxes on Social Security income are highlighting early tensions among Democrats in the Minnesota Senate.
Photo illustration by Kevin Dietsch | Getty Images

Updated at 2:25 p.m.

A fresh crop of Minnesota DFL lawmakers took to social media Tuesday to push back against their own leaders, insisting that they’d fight to exempt all Social Security income from state taxes once they take office.

It was the first sign of tension among a new DFL Senate majority that will hold the chamber by a single vote come January. A defection by just one member of their caucus could jeopardize the passage of major legislation or give decision-making power to Republicans if they are able to forge a bipartisan coalition.

The comments came after Minnesota finance officials forecast a $17.6 billion projected budget surplus over the next two years. Gov. Tim Walz and legislative leaders said the massive pile of money would give them a historic chance to fund education, child care, climate plans, public safety, housing and other priorities.

But they stopped short of committing to a full rollback of the Social Security tax Tuesday and suggested that they’d consider an approach that kept the tax in place for top income earners.

“I’m interested in exploring the Social Security, eliminating the tax on Social Security, but we have to understand that right now in Minnesota that largely means we would be giving a tax cut to wealthier people who are not at the peak of their spending on childcare, and housing and all the other things that go with that,” House Speaker Melissa Hortman, a Brooklyn Park Democrat, said Wednesday during a panel discussion.

Both she and incoming Senate Majority Leader Kari Dziedzic, DFL-Minneapolis, said they and others in their caucuses had qualms about fully eliminating the tax, since it brings in about $500 million a year. They said they’d continue discussing the matter to get a sense of where legislative Democrats stood on the plan.

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Tuesday evening a handful of new lawmakers that won tight races around the state took to Twitter to say they’d support a full exemption once they get to St. Paul.

“I stand by my promise to fight for full elimination of the tax on Social Security benefits,” Sen.-elect Heather Gustafson, DFL-Vadnais Heights, said. “With the release of the budget forecast today, it is clearer than ever that now is the time to relieve Minnesota’s seniors from the double-tax on their Social Security benefits.”

Gustafson unseated Republican Sen. Roger Chamberlain.

A smiling man in the woods
Grant Hauschild is the newly-elected DFLer in Minnesota Senate District 3.
Courtesy of Grant Hauschild

Senator-elect Grant Hasuchild, a Hermantown Democrat who is set to represent Senate District 3 in northern Minnesota, is set to sit on the Senate Tax Committee. In an interview with MPR News, he echoed Gustafson’s concerns.

“I wouldn't say we're pushing back. We're just making sure, hey, this is our priority as freshmen, as folks from competitive districts, this is something that we care about, and we want everybody to know,” Hauschild said.

Two other new legislators — Rob Kupec and Judy Seeberger — retweeted those posts and Seeberger voiced her support for eliminating the tax in another tweet. And on Wednesday morning, all four issued a joint news release saying they would seek a full exemption.

“As four incoming Senators who helped deliver the majority to the DFL, we will be making this our top budget priority going into the legislative session,” they said.

Republicans and Democrats at the Capitol agreed to drop the state income tax on Social Security benefits earlier this year as part of a tax bill. But that proposal failed to make it across the finish line after it got ensnared in end-of-session disagreements.

Around the state, several candidates ran on a promise of dropping the tax altogether. 

As they head into the 2023 legislative session, Democrats will have to decide how far they’ll go in rolling back or striking the tax, and DFL leaders will have to hold their members together when any defection could cause major legislation to fail.

Meanwhile, Republican leaders at the Capitol said Tuesday they’d hold DFLers accountable for their pledges on the campaign trail, and they voiced support for a full exemption.

“I believe that adding that tax (elimination) on Social Security across the board is what we need to do.” House Minority Leader Lisa Demuth, R-Cold Spring, said Tuesday. “That's what we talked about on the campaign trail and I think that it is an area that we do need to focus on.”