ST. PAUL – State Rep. Dean Urdahl, R-Acton Township, is sponsoring legislation to fully repeal the state tax on Social Security, providing some breathing room for seniors – particularly those on fixed incomes.
Urdahl said Minnesota is one of just 12 states that still tax social security benefits. With a $17.6 billion state budget surplus, and price increases straining family budgets, Urdahl said the time is right for a full repeal and has co-authored H.F. 136 to make that happen.
“We are taxing this income twice and it’s doing a disservice to senior citizens and others on Social Security,” Urdahl said. “People already paid payroll taxes on their Social Security but the state still requires to list these benefits on their tax returns. Our state should not be an outlier on this issue by continuing this practice and ending this tax should be a top priority for this session.”
Minnesota’s tax structure is unfriendly to retirees, Urdahl said. Reports indicate Minnesota loses vastly more domestic residents to other states than it gains. Business and personal finance publisher Kiplinger lists Minnesota among its “not tax-friendly” states for retirees, indicating, “The North Star State offers cold comfort on the tax front to retirees.”
Urdahl said a full Social Security tax repeal would benefit an estimated 473,000 people with an average tax savings of $1,276. In contrast, Gov. Tim Walz’s budget proposal doesn’t fully repeal the state Social Security tax, with only 43% of Minnesotans receiving some form of relief – on average, $278 per household.
Urdahl acknowledged cold winters play a role in Minnesota’s migration patterns, which he said simply underscores the importance of improving our state in areas the Legislature actually can control.
“Let us acknowledge, there always will be people who want to spend the winter season in warmer regions, but our tax code does play a factor in where they set their permanent address upon retirement,” Urdahl said. “Our state tax code encourages people to leave our state and that needs to change.”
Democrats, Urdahl said, signaled they were all-in for a repeal of the Social Security tax last fall but now, more than a month in to the 2023 session, bills related to this subject have stayed on the back burner in the House.