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Social Security tax elimination, tax cut included in Minnesota deal but no Walz checks

The compromise plan was announced Saturday, May 21, and could be the state's largest tax cut proposal in state history. Lawmakers would have to adopt it and the governor would have to sign it into law before the changes could take effect.

Minnesota Legislature Tax Conference Committee
Sen. Carla Nelson, R-Rochester, on Saturday, May 21, 2022, speaks to members of the legislative conference committee on taxes. The panel considered eliminating the state's tax on social security benefits.
Dana Ferguson / Forum News Service
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ST. PAUL — Minnesotans could stand to see an income tax cut, the elimination of the state's tax on social security benefits and a shift to make more people available for a renter's tax credit under a compromise plan up for consideration at the Capitol.

But that's only if lawmakers can speed through a slate of $4 billion in spending bills and the $3.9 billion tax plan within the next day.

Conference committee chairs on Saturday, May 21, released their tax deal which included a 0.25% income tax cut to Minnesota's bottom tax bracket and the removal of the state's social security tax. The committee was set to take up the proposal on Saturday evening and legislative leaders said they expected the plan would move forward.

"This is the largest tax cut in the history of the state — by far — and for the first time in almost 40 years, senior citizens will not pay one dime in tax on their social security benefits," House Tax Committee Chair Paul Marquart, DFL-Dilworth, said as conference committee members announced details of the plan.

For days, lawmakers met mostly in private to bridge the gaps between proposals put forward by the Republican-controlled Senate and the DFL-led House of Representatives. And they reached that tentative deal with just hours left in the legislative session.

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Under the plan, the state's lowest income tax rate would decrease from 5.35% to 5.1%, giving some permanent tax relief to all those who pay income taxes beginning as soon as employers updated their withholdings. Minnesotans could also see increased child and dependent tax credit rates, additional credits to offset the cost of child care, enhanced credits for renting a home and property tax relief.

"It is our duty to get these resources back into the hands of Minnesotans to help them better afford their lives," Senate Tax Committee Chair Carla Nelson, R-Rochester, said.

Rep. Paul Marquart and Sen. Carla Nelson
Minnesota Rep. Paul Marquart, DFL-Dilworth, and Sen. Carla Nelson, R-Rochester, on Saturday, May 21, 2022, shake hands after announcing they'd reached a deal on a $3.9 billion tax plan.
Dana Ferguson / Forum News Service

The plan did not include one-time rebate checks that Gov. Tim Walz had proposed, likely indicating that they're off the table this year. Lawmakers said there wasn't enough money within their budget target to accommodate the checks this year with all the other tax changes they put forward.

While the committee agreement marked a step forward for the proposal, it didn't ensure the bill's passage through the divided Capitol.

A day earlier, House Speaker Melissa Hortman, DFL-Brooklyn Park, said that legislative leaders and the governor remained confident that lawmakers could pass a raft of legislation including the new state government spending and proposed tax cuts and credits before they were set to adjourn the legislative session on Sunday at 11:59 p.m. And she said House leaders would wait to pass the tax bill until several other spending plans made it through the Capitol first.

Leaders on the tax committee urged fellow lawmakers to strike deals in those areas quickly to get a tax bill across the finish line on Sunday.

"We must not let this transforming, historic tax bill be held hostage by many of these other things," Nelson told reporters. "It would be shameful if this got lost in other negotiations."

Key issues and billions of dollars in limbo

Top priority issues for both chambers, including additional funding for K-12 schools, long-term care facilities, health care programs and public safety remained in limbo Saturday as lawmakers reached standstills in negotiations.

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As of Saturday evening, few state government spending bills had been made public. And only a plan to increase funding for higher education had reached either chamber for a vote.

Lawmakers passed a budget last year that runs through 2023, so they don't have to do anything in the hours remaining before their deadline. But legislative leaders and the governor on May 16 announced that they'd reached a broad agreement to spend about $8 billion of the state's $9 billion budget surplus on tax cuts and credits, as well as $4 billion in new spending for various state programs.

And they handed down to committee chairs spending targets that should guide their negotiations in the final week of the session.

For some, those targets helped forge deals. But for the majority, compromise remained elusive, leaving additional spending for public schools, police agencies, health and human services programs and transportation services in question with dwindling time left to get their work done.

"I don't know what else to do," Sen. Roger Chamberlain, R-Lino Lakes, said before gaveling out a committee discussion on K-12 education spending over questions from Rep. Jim Davnie, DFL-Minneapolis. "We don't have days and days. We hardly have hours."

Senate Majority Leader Jeremy Miller, R-Winona, on Saturday told reporters that negotiations on several spending bills were still ongoing but the timeline to get them across the finish line was growing short.

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

Miller said that heads in each chamber had stepped in to start resolving problems in negotiations. And he remained hopeful that legislators could pass supplemental budget bills and the tax bill before Monday.

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MORE FROM DANA FERGUSON:
Gov. Tim Walz said he would dip into the remaining American Rescue Plan funds on Tuesday after negotiations about a special session to debate billions of dollars in supplemental spending and tax relief failed.

Follow Dana Ferguson on Twitter  @bydanaferguson , call 651-290-0707 or email  dferguson@forumcomm.com.

Dana Ferguson is a Minnesota Capitol Correspondent for Forum News Service. Ferguson has covered state government and political stories since she joined the news service in 2018, reporting on the state's response to the COVID-19 pandemic, the divided Statehouse and the 2020 election.
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