Details on Minnesota tax relief to become clearer next week

Minnesota lawmakers will take a brief break this week before launching into the final sprint of the legislative session. 

Debates around tax relief, recreational cannabis, paid family and medical leave – as well as the bulk of a $72 billion budget proposal – are ahead. And details about what will make it through the DFL-controlled Capitol this year will become clearer in the next couple weeks.

Ahead of the Easter and Passover recess, House Speaker Melissa Hortman, DFL-Brooklyn Park, said that the last few weeks of session would center on spending bills and that policy proposals might have to wait another year.

“If we can get other things done, as we go with implementing the budget, then we'll get other things done. But anything that's not related to the budget is not essential and could time out this session,” Hortman said.

Here’s a look at some of the biggest sources of friction for lawmakers.

Tax relief

One of the biggest questions remaining this legislative session is how lawmakers will send some of a projected $17.5 billion in budget surplus back to Minnesotans.

DFL leaders and the governor last month set budget targets that included $3 billion in additional tax relief in the next two years and $1.3 billion in the two that follow. But beyond talking about where lawmakers would like to see that money go, we haven’t seen a clear outline of what could be encapsulated in that bill.

Tax committee chairs are expected to have their bills up after the recess and both chambers are likely to touch on a few key themes: the tax on Social Security benefits, rebate checks and tax credits.

House Speaker Melissa Hortman said she expects a final tax bill will include one-time rebate checks, elimination of the Social Security tax for some Minnesotans (not a full exemption) and credits for other groups. 

“There's a desire to make it simpler and more straightforward. There's a desire to exempt more individuals from paying any tax on their Social Security income. There is not a desire to say no matter how much you make, if some of your income is from Social Security, we're going to exempt that from taxation completely,” Hortman told MPR News.

Gov. Tim Walz and Senate Majority Leader Kari Dziedzic have echoed that desire to grow the pool of people who are exempt from the tax rather than eliminating it altogether. While the state has a unique and bountiful situation now, that might not be the case down the road, they said. 

And the trio said Social Security benefits are part of a person’s income and worry that exempting that income for wealthy Minnesotans’ could prevent them from paying their fair share. 

The tax on Social Security benefits also brings in about $600 million a year right now, so DFL leaders are worried about losing that revenue in the future.

Republicans and some Democrats have sought the full exemption of the Social Security tax and said they would keep up pressure to abandon the tax altogether.

Rebate checks

Hortman also said that tax leaders in both chambers have talked to the commissioner of the Minnesota Department of Revenue about one-time rebate checks. 

Walz has pushed for the checks for months and most recently put out a plan that would send up to $2,000 out to couples who make less than $150,000 or $1,000 to single people who make less than $75,000 a year. Another $200 could be tacked on for up to three dependents.

Republicans have also said they support one-time rebates and both parties have voiced support for tax credits tied to young children.

And tax hikes?

New fees for food or package deliveries, as well as ride services like Uber and Lyft that would boost funding to the state’s highway accounts and transit funds are included in the transportation budget bills. Another proposal would allow the Metropolitan Council to set a three-quarter of 1 percent sales tax increase in the metro area to boost funding for transit.

Supporters said that prior proposals to raise the gas tax or levy other taxes to boost funds for Minnesota’s transportation needs had fallen short at the Capitol. And they said that ongoing funding streams were needed to keep state money moving toward road and transit projects.

“Nobody is excited about raising fees and taxes. We don't like it,” Rep. Erin Koegel, DFL-Spring Lake Park, said. “But we also don't like seeing the, you know, a Titanic-sized pothole out in front of the State Office Building.”

Fairmont Republican Rep. Bjorn Olson said the web of potential tax increases were too much for Minnesotans.

“How many times can we stack attacks on top of our people? Just, it's very creatively done and how many times we can stack a tax and double tax and triple tax and find a way to eke out every single penny?” Olson said. “In this bill, it’s absolutely amazing how creative our almost money grubbing people here in the state of Minnesota have become.”

The governor has also proposed an additional tax for people who make money selling stocks and a payroll tax increase that would fund a paid family and medical leave program that’s moving forward.

Democrats say that because much of the budget surplus is one-time, the state needs to consider additional taxes and fees for areas that they expect will need ongoing spending.

Republicans have opposed any new taxes and fees and said that with the current budget outlook in Minnesota, lawmakers shouldn’t have to go back to taxpayers for any new money.

Other DFL priority policies

At least two priorities for Democrats – legalizing recreational cannabis and setting up a paid family and medical leave program – are also on track to pass this year, Hortman said. And budget targets had accounted for some of the funding that each would require.

But, another top DFL concern could have a tougher time making it through the Capitol.

With a one-vote majority in the Minnesota Senate, DFLers said they were still working internally to see if they could pass a pair of gun control measures. One would require universal background checks to purchase a firearm and the other would set up a path to remove firearms from a person deemed to be a threat to themselves or others.

“We have 34 members of the Senate. Some of them are new, some of them are getting their feet under themselves learning what it's like to be an elected official. And they're learning what it's like to make tough decisions,” Sen. Ron Latz, DFL- Saint Louis Park, said. “For some, they look at their districts and these are not necessarily easy decisions for them. I'm cautiously optimistic that we're going to get to 34 on this. And we're going to keep working until we do.”

The Legislature is set to return from its spring recess on April 11.

• Wabasha County board tries to dock prosecutor’s pay over plea bargains
• Tabke wins Shakopee-area legislative race after recount, House control still unknown
• Report: Minnesota Lottery needs to tighten up how it regulates retailers
• Hennepin County looks to spread the word of Minnesota’s red flag law