Potential Social Security tax cut has local fingerprints on it

Seniors in Minnesota could soon see a big cut in state taxes on their Social Security payments--and that makes a state representative from Aitkin happy.

Dale Lueck

Seniors in Minnesota could soon see a big cut in state taxes on their Social Security payments-and that makes a state representative from Aitkin happy.

Republican Dale Lueck, 67, initially authored a bill this session that would gradually phase out Social Security tax entirely, 10 percent a year over 10 years. However, the Minnesota House of Representatives Tax Committee ultimately did not include it in the omnibus tax bill. But they did put in a similar, smaller-scale idea that would save seniors money-an estimated $269 million that stays out of state coffers and in seniors' bank accounts. According to the House GOP, by 2019 about 284,000 returns filed by seniors would get an exemption on Social Security benefits, and their average taxes would decrease by $710.

The omnibus tax bill, which on Thursday passed the House by a vote of 80-52, is an example of a system within the state lawmaking process that trades individual legislator power for overall efficiency. An omnibus bill is a compilation of all the bills that have to do with a particular subject, which the House or Senate considers at once, as one big superbill. Rather than having House members debate thousands of bills separately, they roll them into several big ones. The specific committee that deals with the area a given omnibus bill covers-in this case, the Taxes Committee-is the main chef that gets to pick which small bills get mixed into the big bill salad.

Lueck could communicate with the Taxes Committee and try to push them to act a certain way, but it was up to them whether the Social Security tax cut got the green light.

That the provision finally made it into the big leagues is the culmination of years of advocacy by himself and others, Lueck said.


"I worked (on this) last year and the year before," he said. "A bunch of us did."

Five legislators with bills that had some version of the Social Security deduction idea each submitted their legislation, getting across to the Taxes Committee that the idea had weight behind it, Lueck said.

The dire straights of seniors in Aitkin County when Lueck was an official there helped motivate him to push the initiative. Lueck pointed out seniors who don't have retirement funds other than Social Security are in particularly rough shape.

Some seniors were making so little money in Social Security income they already didn't have to pay state taxes on it, Lueck said. The existing threshold is $32,000 for a married couple and $25,000 for a single person.

"That's not a place to be in," Lueck said. "That means you are really scraping by."

How it works

The provision that made it into the omnibus tax bill would establish a deduction based on the amount of income below a certain threshold. The deduction goes down for every dollar above the threshold.

Married and joint filers have a threshold of $72,000 and singles, $56,000. A person's adjusted gross income plus one-half of their Social Security income counts as income for the threshold.


The threshold is smaller for taxable years 2017 and 2018-$61,000 for couples, $46,500 for singles.

Tax credits are worth more to taxpayers than deductions because credits give back dollar-for-dollar, but deductions simply reduce taxable income and use percentages to calculate the amount of money. The Social Security provision appears to be a hybrid of the two, because it reduces taxable income first, but does not use a percentage.

The House's vote on the omnibus tax bill is especially timely because of the impending April 18 tax filing deadline.

Seniors can visit the Minnesota Department of Revenue website- find a location near them where they can receive free tax return preparation.

Minnesota State Capitol. Wikimedia Commons/AlexHoratius

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