Will there be tax relief for seniors this session?

On Tuesday, the Minnesota House tax committee heard two bills which tackled the issue many of us have been following for some time, the tax on social security benefits in Minnesota. 

 HF 9 authored by Rep. Dale Lueck proposes to phase out the tax on Social Security in 5 years, (with a reduction of 20% a year until fully phased out).  Rep. Kathy Lohmer’s bill HF 213 does the same thing, less speedily, over 10 years.

The Committee heard testimony from one member of the public and a few people representing groups.  Here are some highlights.


  •  Barb Linert.  Barb Linert also testified two years ago for this bill. Her story is very like other seniors we have heard from.  She and her husband are thinking about moving out of Minnesota to make their retirement savings go further.  Barb has a grandchild with special needs, and they would like to be able to contribute as much as possible to her care. Click here to see her testimony from two years ago.
  • Nan Madden, Minnesota Budget Project (Minnesota Council on NonProfits).  Ms. Madden argued as she has done before that removing the tax on social security benefits would forgo too much tax revenue that the state needs to provide services.
  •  Will Phillips, AARP. In the past, AARP has supported bills such as these but last session they switched tactics and declared themselves for “tax fairness.” They support raising the threshold on the tax Social Security so that not only the poorest seniors are exempt.
  •  Paul Cummings, representing the Dayton Administration Department of Revenue argued like Nan Madden that the lost revenue would be too costly.  “About a Billion Dollars” per biennium when fully phased in.  Also, that only “about half of all seniors pay it.”


 What did members have to say?


  • Rep. Glenn Gruenhagen pointed out “A Billion dollars” is a lot of taxes.  He said he runs into seniors all the time who are concerned about having enough money to retire on.  He also raised the issue that letting seniors keep money would mean more money staying in the economy. 
  • Chair Steve Drazkowski suggested that with the threshold set so low, there was a penalty on Seniors who want to work.


  •  Rep. Jerry Hertaus challenged the Paul Cummings estimate  of how much it would “cost” the state if  the bills(s) were to pass


  • Chair Sarah Anderson challenged Nan Madden that if reducing the tax revenue by passing these bills would cause problems, would she agree that letting spending grow instead would also cause problems for the budget. Ms. Madden changed the subject noting that they had a specific cost estimate and that you could also project the costs of the growth in the need for services. 


  • Rep. John Peterburg asked staff if there were any examples of other government benefits that were taxed. The answer to that was no.  In fact, Social Security was not taxed until the 1980s.


  • This led to a discussion of pensions, which in most cases are taxable. Rep. Diane Loffler brought up, and Rep. Lyndon Carlson added later that some public worker pensions are coordinated with social security which means that they pay a higher contribution, but they do not contribute or collect from social security.  Rep. Loeffler said it would not be fair if these government workers continued to pay taxes on their pensions while people who collect social security would not be taxed under these bills.


  • Rep. John Lesch complained that there are a lot of reasons why people leave the state.  Also that we can’t estimate how much money would stay in the state assuming the bills did pass.


  • Chair. Jennifer Loon raised the issue in the news about the growing number of Seniors on food stamps.  Their costs are going up, but their income is fixed.


  • DFL lead Rep. Paul Marquart said that these bills are too expensive and “not realistic and we can’t afford it.” Said he supports “targeted” relief like raising the threshold or property tax relief.  Said that structural surpluses show that our state is in great shape and these cuts would jeopardize it. He closed by saying that as a grandparent, no amount of money would make him move away from his granddaughter. 


  • Rep. Kathy Lohmer, the author of HF 213 in summing up said that she has received mail from many constituents since she was elected in 2010 about their struggles to stay in Minnesota.  She said that many seniors would choose to stay in Minnesota, but some don’t have that choice.


  • Rep. Metsa summed up by saying that the time had come to do something about this. 


What’s next?  The two bills were “laid over for possible inclusion” which means they will be considered as potential amendments to the omnibus tax bill.


The Governor releases his budget next week which should contain any of his ideas for tax relief. It’s unlikely that he has changed his mind about getting rid of the tax on social security benefits, but he may be more open to the provisions in HF4, Chair David’s bill, which raises the threshold from 23K for single filers and 32K for married filers which was set back in 1985.