ST. PAUL — Minnesota Senate Republicans on Thursday, Feb. 20, introduced an outline of their tax plan, which included an exemption on social security income from state taxes and a decrease to the state's lowest income tax rate.
While details about the plan were scarce, GOP leaders said they hoped to spend $1 billion of a forecast budget surplus to cover the cost of the social security exemption and bring down the tax rate on those who make $26,520 or less from the current 5.35% income tax rate to 4.9%.
The senators also said they would seek to expand the number of earners eligible for the K-12 education tax credit, close a tax loophole hitting farmers and businesses, reform school equalization aid, redirect funding to affordable housing and reform rules for charitable gaming.
“This is about relief for everybody, we have $1.3 billion. And as the logo shows, we’re going to give the billion back,” Sen. Roger Chamberlain, R-Lino Lakes, said. Chamberlain chairs the Senate tax committee. “If you’re paying taxes, low income to high income, you’re getting relief."
Republican leaders acknowledged that some of their proposals will be a stretch in the divided Statehouse, but they said they wanted to put the options on the table as discussions about how to spend the state's $1.3 billion surplus.
Senate Majority Leader Paul Gazelka, R-Nisswa, said Republicans would reduce spending in future state budgets to adjust to cover the lower income tax receipts. And Republicans said the boost to the economy from the breaks would spur economic growth for the state.
The GOP plan was met with quick opposition from Democrats who pointed to the hole the plan could put in the state's ongoing spending plans.
“The plan released by the Senate Republicans today is just reckless," Senator Ann Rest, D-New Hope, who serves as DFL lead on the Senate Tax Committee, said in a news release. "The proposed tax spending costs the state more than a billion dollars. We haven’t even seen the budget forecast to know if this money is available. This is just a wish list."
An update on the state's revenues next week could help propel surplus spending plans or force lawmakers to pump the brakes on what the Legislature can offer up.
House Democrats have said they want to spend $500 million of the funds boosting early childhood education scholarships and child care assistance program appropriations and reimbursement rates. Gov. Tim Walz says he supports funding for child care but would also like to pad the state's rainy day fund ahead of a potential economic downturn. Walz has said he opposes the tax exemption for social security income.
Absent from the GOP plan was an effort to provide scholarships for parents who want to send their children to private or parochial schools, a top priority for Senate Republicans. They said they'd carry that effort separately.
“We just have no support from the governor,” Gazelka said.