Minnesota Republicans propose $13B tax cut

Leaders of the Republican minority at the Minnesota Legislature rolled out a $13 billion “Give It Back” plan Tuesday to tap most of the state’s $17.5 billion budget surplus for one-time and permanent tax cuts, including rebate checks and fully eliminating taxes on Social Security.

The GOP plan would use one-time money for rebate checks of $1,250 for individuals and $2,500 for joint filers, plus tax credits of $1,800 per child for the next two years. For permanent relief, it would end the state’s partial taxation of Social Security income, cut income tax rates and raise exclusions for property taxes.

Republicans announced their plan a day after state budget officials released an updated forecast showing that the surplus has remained stable, with higher-than expected revenues neatly offsetting a new law requiring that inflation be factored into spending projections.

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Senate Minority Leader Mark Johnson, of East Grand Forks, said at a news conference that the surplus provides a historic opportunity to return the money to taxpayers.

“With over $17.5 billion, if we don’t give tax relief to Minnesotans now, when would we?” asked House Minority Leader Lisa Demuth, of Cold Spring.

Republicans want deeper cuts than Democratic Gov. Tim Walz and Democratic legislative leaders have proposed and would return more of the surplus to taxpayers instead of spending it on education and other programs as many Democrats want.

While Republicans don’t have the votes to pass their plan as is, they still have leverage they could use to try to get some of what they want. That is because lawmakers on both sides want to pass a public infrastructure borrowing package known as a bonding bill. But raising the state’s debt load requires 60% supermajorities in both the House and Senate. And that would require several Republican GOP votes in each chamber.

Johnson said Senate Republicans want a bonding bill, but they also want assurances of tax relief before they commit themselves to details of that package. Demuth said bonding and tax relief are “part of the same conversation.” Neither leader, however, would get specific about potential trade-offs.

The GOP tax plan, which would cost $13 billion over two years compared with the $5.4 billion that Walz proposed last month, has similarities that could be starting points for negotiations.

Walz called for rebate checks of $2,000 for families with incomes below $150,000, and $1,000 for single filers making less than $75,000. Parents could also get an extra $200 for each dependent — up to three. Those making more than the income caps would get nothing, He would lower taxes on Social Security for more than 350,000 households so that 43% of households receiving it would save an average of $278. And he called for up to $10,500 in expanded tax credits for families with kids.

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The governor said Monday that his proposal would represent “the largest tax cut in Minnesota’s history.” As for the GOP’s “Give It Back” slogan, he said, “Join the crowd.” But he said it “makes no sense” to eliminate Social Security taxes for the wealthy.

Minnesota is one of 11 states that tax Social Security to varying degrees. Demuth noted that even some Democrats campaigned last year in favor of full repeal. GOP Rep. Kristin Robbins, of Maple Grove, said their proposal would give 472,000 Minnesotans an average of $1,277.

For the permanent tax cuts, full elimination of income taxes on Social Security would cost about $1.26 billion per two-year budget period going forward, said GOP Sen. Bill Weber, of Luverne, while the 1% income tax rate reductions for the bottom two brackets would cost about $3 billion. The property tax breaks — from raising the state’s homestead value exclusions — would cost about $70 million every two years.

For the one-time relief, the rebate checks would cost about $5 billion, Weber said, while the child tax credits would cost about $4 million.