Why tax-free Social Security doesn't make sense

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The big question before us this legislative session is how we are going to meet the critical needs of Minnesotans across the state. With a large budget surplus and years of underfunding in schools, child care and infrastructure, it's clear there is much the state can and must do to use our collective resources for the common good.

There are also multiple proposals to reduce or eliminate state income taxes on Social Security benefits. Minnesotans have significant questions about these proposals. As members of the House Tax Committee, we wanted to lend needed clarity to the debate.

Let's start with some background on Social Security.

Social Security is a public pension benefit funded primarily by the payroll taxes of current workers and employers. It is not a personal savings account funded by a worker's own contributions. It's set up so we all get more out of it when we retire than what we paid in while we were working.

People of all income levels receive Social Security. So, contrary to the undertones of the current debate, "Social Security beneficiary" is not synonymous with a senior in need. Yet because of this misunderstanding, cutting taxes on Social Security is presented as a way of helping the lowest-income seniors. But that's not correct.

Eliminating all taxes on Social Security income would do nothing to help most seniors, because the majority already pay no taxes on their benefits. In fact, 58% of all Minnesota seniors pay no taxes on Social Security.

The bulk of taxes on Social Security income are paid by high-income retirees; taxes on middle-income earners are modest. And while most seniors would see little or no benefit, the collective cost of a full repeal of Social Security taxes would be enormous, a billion-dollar hole in our budget that would grow every year.

There are many low- and middle-income seniors in Minnesota struggling to make ends meet. But that has far more to do with the escalating cost of prescription drugs, long-term care, and housing than taxes on Social Security benefits. Instead of cutting taxes for a narrow band of wealthier seniors, we can choose to address the workforce crisis in long-term care and nursing homes so all seniors can find supportive housing, if they wish, or age in place.

We can also deliver property tax cuts — a particularly challenging issue for seniors on fixed-incomes — which would benefit a much wider range of Minnesotans. And we can take action to make prescription drugs more affordable.

We can choose to invest in ways that will strengthen our economy and make it easier for all Minnesotans to afford their lives. From better access to quality and affordable child care and early learning to reducing the cost of higher education to making housing more affordable for homeowners and renters across the state, the state can make real progress on these and many other challenges. But permanently reducing revenue by billions of dollars will put these investments at risk.

We can understand how some could see the size of our surplus and conclude we can do both — fully exempt Social Security from taxes and make the ongoing investments we need. But the reality is that most of our surplus is one-time money, and future forecasts could change at any point. We simply don't have the ongoing funds required to make transformative investments in pressing priorities while also passing a permanent multibillion-dollar tax cut that largely benefits the wealthy. Doing so would also increase the likelihood of future deficits. For all of these reasons, we and many other Democrats don't support a full exemption.

Republicans may have a myopic focus on cutting taxes for the wealthy, but Democrats are unified in working to fully fund our schools, repair our infrastructure, reduce costs for families, and protect the safety and autonomy of all Minnesotans.

This is what Minnesotans voted for and it is what we will continue to deliver.

Dave Pinto, DFL-St. Paul; Esther Agbaje, DFL-Minneapolis; Steve Elkins, DFL-Bloomington; and Michael Howard, DFL-Richfield, are members of the Minnesota House.