Social Security Tax Eliminated Under Minnesota Lawmakers’ Deal

FOX 9 —  Minnesota lawmakers have agreed to eliminate the state’s tax on Social Security income, cut individual income taxes, and expand the renter’s credit under an end-of-session deal.

The state’s bottom income tax bracket will be cut from 5.35% to 5.10%. Tax filers pay the bottom rate on the portion of their income up to $41,050 for married couples and $28,080 for singles in tax year 2022.

The Social Security exemption will benefit retirees with significant investment or pension income, as Social Security is already exempt from state taxes for lower-income retirees. The renter’s credit will become refundable, meaning that Minnesota renters who owe no income tax will still be eligible for the credit.

Together the three changes account for $3.4 billion of the $4 billion in the tax bill. Lawmakers and aides from the House and Senate both confirmed the key elements of the agreement.

A conference committee is scheduled to discuss the changes on Saturday evening. The Legislature faces a Sunday night deadline to pass bills.

But there’s no guarantee the tax cuts and credits happen. Passage of the bill will require lawmakers to agree to several spending measures that are at impasse: K-12 education, public safety, and health and human services.

The disagreements over $1 billion in new funding for public schools have been especially public. Saturday, Senate Education Chairman Roger Chamberlain ended a conference committee meeting over questions from his House counterpart, state Rep. Jim Davnie.

“I don’t know what else to do. We don’t have days and days. We hardly have hours,” said Chamberlain, R-Lino Lakes.

The Senate favors using $59 million for literacy programs and $941 million to address a funding gap for mandatory special education services. In addition to those measures, the House wants to add mental health services and a provision that makes hourly school employees eligible for unemployment benefits.

Walz has vowed not to call a special session, but it’s becoming increasingly unlikely that lawmakers can address the several outstanding issues on time. The divided Legislature faces a deadline of 11:59 p.m. Sunday.

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