The significant projected state budget surplus represents a historic opportunity to make transformational changes to build a future in which all Minnesotans are healthy, safe, and financially secure.

State policymakers should act boldly and use these resources for much-needed public investments that strengthen everyday Minnesotans and their communities—affordable housing and child care, high quality education for every student, clean air and water, and much more.

But we can’t make these investments if policymakers enact billions of dollars in poorly targeted permanent tax cuts that leave out the most struggling Minnesotans while giving the largest tax cuts to high-income Minnesotans.

Minnesota already takes a responsible and targeted approach to Social Security tax exemptions.  

But some policymakers want to replace this current approach and instead exempt all Social Security income from taxes. That would give the biggest tax cuts to high-income seniors, who would get annual tax reductions of more than $2,000.

The letter below, including organizational signatories, will be shared with Governor Tim Walz and members of the Minnesota Legislature at key moments in the policy debate.

We believe that the projected state budget surplus represents a historic opportunity to make transformational changes to build a future in which all Minnesotans are healthy, safe, and financially secure. We can’t go back to a status quo that leaves too many of our neighbors behind and keeps Minnesota’s racial disparities – some of the worst in the nation – in place.

Now is the time for bold public investments to strengthen everyday Minnesotans, their families, and communities, focusing on those who face the greatest barriers to participating in our state’s prosperity.

But the state won’t be able to make and sustain these investments if policymakers spend billions of dollars to exempt all Social Security income from the state’s income tax. These poorly targeted tax cuts do little for the most struggling Minnesotans and erode resources for the services they count on, while giving large tax cuts to those with the most resources.

Minnesota already takes a responsible and targeted approach to taxation of Social Security benefits. Current federal and state tax laws mean that the lowest-income seniors don’t pay any income taxes on their Social Security, and all Minnesotans have some of their Social Security exempt.

In contrast, expanding this exemption to include higher-income people and all Social Security income would cost more than $1.3 billion in FY 2024-25, and the cost grows substantially in the future along with an increasing number of seniors. Lower-income seniors would see little to no benefit, but would feel the greatest harm from a failure to invest in services today, and from potential cuts in services in the future.

The tax cuts from full Social Security exemption are not targeted to the seniors who struggle most to get by. More than half of the tax cuts would go to households with incomes above $143,000, who would get annual tax reductions averaging more than $2,000, according to the Institute on Taxation and Economic Policy. These high-income households would get big tax cuts simply because Social Security benefits are one of their sources of income.

Minnesota should continue to take a targeted approach to Social Security taxation. Instead of large tax cuts for high-income seniors, so much more could be achieved by investing in things so that everyday seniors, their children, grandchildren, and neighbors, can thrive. These include services that allow seniors to stay in their homes, high-quality nursing home care, affordable child care and early learning opportunities, affordable housing, Paid Family and Medical Leave, high quality education for every student, clean air and water, infrastructure, and health care.