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Dayton and GOP offer proposals that would cut Minnesota’s taxes

ST. PAUL -- Both Republicans and Democratic-Farmer-Laborites rolled out proposals to cut Minnesota’s taxes Tuesday, but leaders from the two parties are targeting their tax cuts at different groups.

Republican lawmakers proposed to exempt seniors’ Social Security income from Minnesota taxes, while DFL Gov. Mark Dayton asked for a tax credit for child care expenses.

Though some non-senior citizens receive Social Security income, Republicans focused on its impact on retirees. Similarly, while Dayton’s plan would also provide a tax credit for families caring for aging parents, he brought several parents of young children to the podium with him to tout the idea.

Child care costs “often force parents to make difficult choices between high payments for quality care or quitting their jobs to care for their children,” Dayton said. He said his tax credit would help make child care more affordable.

Minnesota currently has a child care tax credit program for families earning up to $39,000 per year. Dayton wants to expand that to people earning as much as $124,000 per year. That would cost about $100 million over the next two years to cover an estimated 92,000 additional families, the governor said.

Under the plan, families could receive a maximum of $2,100 per year in child care tax credits. The typical family, the governor predicted, would receive $481.

How much families could receive from the tax credit would depend on both income and how much they earned. Revenue Commissioner Cynthia Bauerly said the amount of expenses families could claim for the tax credit would decline as income rose above $40,000.

A fact sheet distributed by the governor’s office said child care in Minnesota costs an average of $10,812 per year for one child.

Republicans, meanwhile, said Minnesota shouldn’t count Social Security income when calculating people’s taxable income.

“We’re taxing a benefit here. I think that’s generally speaking unconscionable. We shouldn’t have ever done it in the first place,” said state Sen. David Senjem of Rochester, sponsor of the bill.

His “Retire in Minnesota Act” would phase out Minnesota’s Social Security tax over 10 years, at a cost of $127 million for the first two years.

Republicans said the tax could help Minnesota by encouraging retirees to stay here instead of relocating to one of 38 states that don’t tax Social Security income.

“It’s a fact: Money walks,” said state Sen. Carla Nelson, R-Rochester.

It’s unclear how the two proposals will fare with the Legislature this year, but Republican leaders had kind words for Dayton’s tax cut.

“I think we’re maybe headed in the right direction here,” said state Rep. Greg Davids, R-Preston and the chair of the House tax committee. “I applaud the governor for his efforts.”

Davids said he would “commit right now” to hold a hearing for Dayton’s bill — something that’s not a guarantee for DFL bills in the Republican-controlled House.

Plans at a glance

Child care tax credit

Who’s sponsoring it: Gov. Mark Dayton

Who it targets: Families paying others to care for their children, or for relatives who are elderly or disabled

How much it costs: $100 million over the next two years, and increasing amounts thereafter

What it does: Families can receive tax credits up to $2,100 per year for child and dependent care expenses.

Exempting Social Security tax

Who’s sponsoring it: Sen. David Senjem, R-Rochester

Who it targets: Senior citizens and people with disabilities who receive Social Security payments

How much it costs: $127 million over two years, and increasing amounts thereafter

What it does: Exempts Social Security checks from Minnesota’s taxable income

The Pioneer Press is a media partner with Forum News Service