ST. PAUL — Minority Republicans in the Minnesota Legislature are pushing for $13 billion in tax cuts and one-time direct payments, including rebate checks of up to $2,500 to state residents and eliminating the Social Security income tax.
House and Senate Republicans on Tuesday, Feb. 28, announced their “Give it Back” tax plan following this week’s report that Minnesota’s more than $17 billion budget surplus has remained stable. Besides rebates and ending taxes on Social Security payments, the plan also includes ongoing tax cuts for certain tax tiers.
“Minnesota state government is fully funded. We've got an obligation to make sure the essentials are covered, and we are committed to doing that,” Sen. Minority Leader Mark Johnson, R-East Grand Forks, told reporters at a Capitol news conference. “We've got a $17.5 billion surplus. That belongs with Minnesotans. They're the ones that should determine what their future looks like. We trust Minnesotans and this needs to go back to them.”
The Republican plan includes a version of direct payments to Minnesotans also supported by Gov. Tim Walz: $5 billion total in checks of $1,250 for single people and $2,500 for couples. There would also be a one-time child tax credit available for two years at a total cost of $3.5 billion, which would provide a $1,800 tax credit per child under age 18.
Ongoing tax cuts would apply to the first- and second-tier tax rates by 1%, lowering the rates to 4.35% and 5.8%, respectively. That would result in $3 billion in tax cuts. There’s also an adjustment to the homestead market value exclusion, which would provide $35 million a year in cuts to property taxes.
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The Social Security tax cut would provide an average of $1,277 in tax relief to 472,902 Minnesotans. The state would lose more than $600 million in revenue each year.
Just how much can Republicans do?
While Democrats are in complete control of state government after the last election, minority Republicans may have some room to negotiate on taxes. When it comes to eliminating taxes on Social Security, four Senate Democrats campaigned on the issue and may join Republicans in backing a change. With a 34-33 majority, just one Democrat could tip the balance in favor of a tax cut. DFL Gov. Tim Walz, meanwhile, has said he only supports eliminating the tax up to a certain income level.
In spring 2022, Senate Republicans, House Democrats and the governor said they had reached a budget deal that included eliminating the Social Security income tax, but negotiations fell apart at the end of the session. Just 11 states tax Social Security income.
About $12 billion of the current $17.5 billion surplus is one-time cash that never got spent because GOP and DFL elected officials could not reach any significant spending agreements by the end of last year's regular legislative session.
Republicans on Tuesday said they might also use public infrastructure borrowing, or bonding bill, as a way to pressure Democrats on their desired tax cuts. Bonding bills, which provide funding for critical infrastructure projects across the state like wastewater treatment plans, require a three-fifths supermajority to pass.
The Legislature failed to pass a bonding bill last session, and many projects across the state are awaiting funding. Johnson told reporters that Republicans want to see a bonding bill go through, but they want some assurance from Democrats that tax cuts will also get considered in the Senate.
“We need to see this going through the process as well before we can really start getting commitments on bonding bills,” Johnson said.
The House is already set to vote on a bonding bill in the first week of March.
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The governor and legislative Republicans have some common ground in their proposals, particularly with the rebate checks. In his January budget recommendations, Walz backed payments of up to $2,600 for millions of Minnesotans. Walz has also pitched billions of dollars in new child tax credits.
Democratic leadership in the House and Senate have not yet committed to the rebate checks plan. House Speaker Melissa Hortman, DFL-Brooklyn Park, said the House Taxes Committee would be holding a hearing on the governor’s budget Wednesday, March 1, but said it's too early to say what House Democrats would do on direct payments.
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