The Tax Reform Division considered four bills this week that would allow Social Security income included in federal taxable income to be subtracted for Minnesota tax purposes. Called the “Retire in Minnesota Act,” authors claim the bills will save senior citizens an average of $600 a year and discourage them from moving to other states.
Minnesota is already foregoing $489 million this biennium to fund the Social Security tax exemptions that already exist. Right now, only seniors reaching certain income levels are subject to tax on their Social Security benefits. Extending a complete subtraction to all Minnesota seniors would cost more than $400 million every year.
However, Sen. Rest and Sen. Skoe both indicated an interest in updating the two-decade-old methods for calculating the existing exemptions. The base wages at which the tax is triggered have not been updated since the 1980’s or ‘90’s, allowing “bracket creep” – more lower- and middle-income seniors have become subject to the tax.