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Lawmakers look to ease tax burden on some Social Security recipients

Like most Americans come tax season, Rep. Larry Bellew, R-Minot, was baffled last year as he looked through his paperwork. It was his first tax season after receiving Social Security benefits, and to his surprise, North Dakota collects income tax on Social Security payments.


“I don’t know where I’ve been all these years but I did not know that,” Bellew said.

In response, Bellew sponsored HB 1174, one of three bills this session that sought to eliminate income tax on Social Security. A similar bill in the House was withdrawn and SB 2277 was defeated in the Senate 32-13 in January. HB 1174 passed 63-24 in the House and awaits a final vote in the Senate.

In January, Sen. Jordan Kannianen, R-Stanley, said on the floor that the committee gave SB 2277 a Do Not Pass recommendation because they believed the intent was to help retirees with low income. These retirees, he said, do not pay income tax on Social Security as it stands.

Of the roughly 130,000 North Dakotans who receive Social Security, Kannianen said, 92,000 are retirees. North Dakota uses the federal formula, meaning that if half of one’s social security benefits combined with one’s other income is less than $25,000, it is not taxed. This cap moves to $32,000 for married couples.

“You have to have some pretty significant income in order for these Social Security benefits to be taxed in the first place,” Kannianen said.

An issue of fairness

Bellew said the fact that Social Security is taxed at all is an issue of fairness for all recipients, calling it “a classic case of double taxation.”

“This is not right,” Bellew said. “We’ve already paid taxes on Social Security.”

In a debate on a bill that would eliminate income tax on military retirement income, Sen. Gary Lee, R-Casselton, voiced his concerns about providing income tax exceptions to specific groups.

North Dakota has the lowest rates of the 43 states that levy income tax, according to a spokesperson from the office of the state tax commissioner.

“Everyone should pay a little and we can continue to  have low rates,” Lee said. He went on to explain his general opposition to the military and Social Security exceptions, saying that if the Legislature chips away at income tax, the result will be “fewer people paying more.”


According to Mike Chaussee, a lobbyist for North Dakota AARP, North Dakota is one of only 13 states that tax Social Security at all, and one of only three that tax at the federal rate. Chaussee said he understood the financial constraints of a full repeal and AARP would support compromise on the bill.

“There’s certainly work that other states have been able to do that would allow older North Dakotans somewhat of a break,” Chaussee said.

While Bellew would be “open to negotiation,” he said he believed a full repeal should be a financial priority for the Legislature.

The bill’s projected cost of $20.8 million a biennium in reduced revenue proved to be too high for the Senate Appropriations Committee, however, and a proposed amendment would remove the tax only for those with an adjusted gross income of $50,000 or less. This would lower the revenue loss for the state to an estimated $2.2 million.

“Nobody in the state is going to hurt because of it,” Bellew said of a full repeal. “We have plenty of money.”