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Fate of billions in budget surplus dollars at the heart of Minnesota Senate tax debate

Now, lawmakers from the House and Senate will meet to try and write a compromise bill that can please both Democrats and Republicans.

Senate UI deal
Senate Majority Leader Jeremy Miller, R-Winona, on April 29, 2022, speaks on the Senate floor in support of a $3 billion deal to replenish the state's unemployment trust fund and send money out to front-line workers.
Dana Ferguson / Forum News Service
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ST. PAUL — The Minnesota Senate on Wednesday, May 11, approved an $8.65 billion tax bill, complete with a decrease in income tax rates and elimination of the state's tax on Social Security benefits.

The vast plan advanced on a 42-22 vote after extensive debate about whether offering broad tax relief was the best use of the state's more than $7 billion remaining budget surplus.

Arguments over how to use that funding are likely to continue over the next week and a half, as lawmakers enter the home stretch of the legislative session. They face a May 23 deadline to finish their work or risk leaving the excess funding for the next Legislature to spend next year.

Under the GOP tax plan, Minnesotans would see the lowest state income tax bracket rate reduced — spurring a tax cut for most tax filers, regardless of their income. And those who receive Social Security would no longer have to pay state tax on those benefits.

The second iteration of the tax bill also included $179 million in homestead and business property tax credits and other provisions.

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The bill's author Sen. Carla Nelson, R-Rochester, said that in the face of growing inflation for consumers and as the state sits on a sizable surplus, lawmakers should send money back to Minnesotans on an ongoing basis.

"Today, Minnesotans have overpaid their taxes, they have over-purchased. They have paid for more than Minnesota state government requires," Nelson said. "We are going to return needed tax relief to all Minnesotans."

The proposal met opposition on the Senate floor from Democrats, who said the proposal would benefit wealthy Minnesotans and spend much of the state's remaining budget surplus without resolving some pressing issues.

Instead, they argued the state should boost funding to lower- and middle-income Minnesotans, along with Minnesota schools, local governments and law enforcement agencies.

Democratic-Farmer-Labor lawmakers unsuccessfully attempted to amend the bill to block tax relief for those who earn more than $284,000 a year and send the resulting funds to public schools to help offset the federal requirement to provide special education programs or to local governments and counties to use for their top needs.

"The wealthiest Minnesotans — while we love them and we kind of cheer for them — do not need tax relief at this time," Sen. Nick Frentz, DFL-North Mankato, said. "The distance between the working men and women and the wealthiest Minnesotans is greater than ever."

Members of the Minnesota House of Representatives last week approved a $3.25 billion plan to set up new tax credits and cuts targeted at groups Democrats said could most use the help, including parents with kids in child care, property owners, renters and those with student loan debt.

Now, lawmakers from the House and Senate will meet to try and write a compromise bill that can please both Democrats and Republicans.

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MORE FROM DANA FERGUSON:

Follow Dana Ferguson on Twitter  @bydanaferguson , call 651-290-0707 or email  dferguson@forumcomm.com.

Dana Ferguson is a Minnesota Capitol Correspondent for Forum News Service. Ferguson has covered state government and political stories since she joined the news service in 2018, reporting on the state's response to the COVID-19 pandemic, the divided Statehouse and the 2020 election.
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