Remove the Tax on Social Security benefits in Minnesota!

In all the wrangling this session over “what to do” with the surplus, the laser-like focus of all fiscal conservatives should be a commitment to using this opportunity to cut taxes, especially taxes that other states don’t have or don’t tax as much.   

Among these opportunities to reduce the tax burden on Minnesotans there are bills in the House and the Senate, which would reduce and eventually remove Minnesota taxes on Social Security payments.   Currently only 7 states tax Social Security benefits. Iowa recently completed a phase out of taxes on social security benefits and now joints those state that don’t tax it.  Some of the bills now before the house resemble the Iowa model.  

Some critics of these bills (including The Star Tribune and some DFLers in the Senate) have claimed that not taxing social security is “unfair to younger people” or that it “invents generational warfare.” These arguments distract from the real issue, which is the state’s voracious appetite for more revenue. That is the reason we are now trying to repair the negative impact of our tax code.  If younger shoulders are “bearing a heavy load” as the Start Tribune suggested then maybe we should look at that in addition to making things easier for retirees.

The Minnesota State Demographic Center recently published a study which shows that seniors as a group are voting with their feet. (Minnesotans on the Move, January 2015)  The authors also note that we have a population of “snowbirds” many of whom are seniors –who are part time residents in Minnesota spending their winters in warmer climates.  If they are already accustomed to living elsewhere, surely, planning to live there a little longer each year to escape “the 183 day rule” and Minnesota taxes is even easier than moving out of the state permanently. 

Minnesota's tax on Social Security makes us less competitive neighboring states and, pushes retirees to leave our state in search of a home where their hard earned retirement savings will go farther.

Will retirees leave just because Minnesota does not exempt taxes on social security like the majority of other states do?  Maybe not.  But a few weeks ago in the Minnesota Senate, a retiree from La Crescent testified that his taxes were $1500 more in Minnesota than they were in Iowa and had him thinking about moving back across the border or to Wisconsin.  Wisconsin exempts social security from tax and Iowa just finished a phase in of the exemption similar to what is being proposed here.  

We may not be able to change the weather, but we can change our tax climate for seniors.  We can do it by bringing our retirement tax climate (including estate tax, inheritance tax and the tax on social security benefits) and in line with surrounding states. Maybe then Kiplingers’ Magazine will stop calling us “retirement hell.” (“The 4th worst state to retire in –2014”).

Here is a link to more information from the non-partisan Tax Foundation in Washington DC about which states tax social security and how the taxes work.  It’s a bit dated,  Iowa for example had a phase out that went into effect last year.

 The bills before the legislature are as follows:  

Senate Files:  SF 123 (Senjem) SF 124 (Senjem) SF 254 (Ruud) SF 256 (Limmer) SF732 (Metzen) (In the Senate, SF123 is known as the “Retire in Minnesota Act”--see our earlier post on this bill). 

House Files:  HF 300  (Lohmer) HF 308 (Davids) HF 309 (Davids)  HF746 (Atkins)


What will happen next is that one or two bills will get picked up by the Tax Committee and then ONE bill will probably be included in a bigger Tax bill.   


So what can we do now?   


First, People who want to support these bills should be aware that these proposals are on the table NOW and they should call or write their State Representative and State senator and make them aware that they support phased reduction and end to a tax on social security, whatever bill it ends up being in.   IF the legislator tells you that they are already supporting the bill it’s important to THANK them.  A lot of times, our legislators don’t know what kind of support they have for the decisions they are making.  It’s important to register your support and tell them you want them to support this.  

One Click Politics Link (goes to a quick facebook or email post to your legislature)

Link to the Minnesota Legislator Lookup


Secondly, there will be opportunities to testify or simply show up at the hearings on the bill. The next one is the


HOUSE Aging and Long-Term Care Policy committee on

Wednesday February 25, 2015


Room 10 of the State Office Building


Committee Homepage


If you or others are interested in testifying email Margaret Martín, the Taxpayers League for a handout with more information including maps and directions.  

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