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Minnesota Minority Senate Republicans offer new deal on Social Security tax, bonding

GOP lawmakers pitched an offer to revive the bonding bill, increase spending for long-term care and nursing homes, and eliminate the state's income tax on Social Security payments.

Karin Housley
Joined by fellow Republican senators, Sen. Karin Housley, R-Stillwater, explains the Senate GOP position on bonding at a Capitol news conference in St. Paul on Monday, March 27.
Alex Derosier / Forum News Service

ST. PAUL — Minority Senate Republicans are pitching a revised deal to Democratic-Farmer-Labor lawmakers on Social Security income tax and infrastructure borrowing. Their move comes after a disagreement on the issues stopped a $1.9 billion infrastructure investment proposal from moving forward earlier this month.

Now that legislative DFLers are taking action on tax bills, Senate Republicans came back to the table Monday, March 27, with a new offer to revive the bonding bill, increase spending for long-term care and nursing homes, and eliminate Minnesota’s income tax on Social Security payments. It matches the current DFL budget framework calling for $3 billion in tax cuts and credits.

The governor has pitched giving part of the surplus back to Minnesotans in direct payments.

“Senate Republicans aren't here to just sit in our chairs and vote 'no,' we really do want to work and try to pull this thing together so we can come to a bipartisan agreement,” said Sen. Eric Pratt, R-Prior Lake.

Republicans have already been pushing for full elimination of the Social Security income tax, but new to their offer is extra funding for the departments of Agriculture and Human Services. Nursing homes and long-term care facilities would get $500 million more over the next four years than currently proposed by Democrats, GOP leaders said. It also calls for increasing spending on agriculture by $80 million in the next two-year budget.

The new offer comes a week after DFL legislative leaders and the governor unveiled a general budget framework that would increase spending by about $17.9 billion over the next two years.

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Earlier in March, Senate Republicans blocked the passage of a $1.9 billion capital investment proposal after Democrats declined to act on tax cuts first. Republicans were able to do so because borrowing, or bonding bills, require a three-fifths super majority to pass, meaning Democrats would need 7 GOP votes in the 34-33 Senate. It’s one of the minority’s few bargaining chips with the majority.

But Democrats made good on their promise to move forward with a cash-only infrastructure bill that won’t need GOP support after the borrowing bill failed in the Senate. What Republicans are hoping is that they can claw back some cash from the cash infrastructure proposal from Democrats to help cover the costs of extra long-term care spending and tax cuts.

A big part of the DFL framework is about $2.3 billion in cash for public infrastructure projects, something Senate Minority Leader Mark Johnson said could be freed up if the state borrowed the cash instead.

It’s unclear what appetite, if any, Democratic leaders have for a full elimination of the Social Security income tax, but majority leadership has suggested a partial rollback of the tax could be part of tax discussions. Four Senate Democrats from rural or swing districts and some DFL House members also say they support elimination.

Minnesota is just one of a dozen states that tax income on Social Security payments, something opponents say is unfair to retirees and counter to the purpose of the benefit. But opponents of eliminating or cutting the tax say it’ll mainly help wealthier retirees and hurt the state budget. It would likely lose the state $600 million a year in revenue.

Unlike the Senate, House Republicans supported the $1.9 billion bonding bill without action on taxes first. The House Republican Caucus did not immediately comment on the Senate offer.

Democrats now in complete control of state government have been moving extraordinarily fast on their priorities this session, and it’s not common for the Senate, House and governor’s office to have a general agreement on a budget this early in the session.

Budget bills are already getting crafted in committees this week before the legislative spring break, and they could begin seeing votes on the House floor as soon as April 10, according to a DFL caucus spokesperson.

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Follow Alex Derosier on Twitter @xanderosier or email aderosier@forumcomm.com .

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Alex Derosier covers Minnesota breaking news and state government for Forum News Service.
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