MARSHALL – In a move Republicans say will help keep retirees in the state, Minnesota Senate Republicans on Wednesday introduced a bill that would phase out taxes on Social Security income.

The “Retire in Minnesota Act” is predicted to provide more than 380,000 seniors with tax relief, which backers hope will be enough to keep them from packing up and moving to states that do not tax Social Security benefits. Currently, Minnesota is one of seven states in the U.S. that fully taxes Social Security benefits. In all, 13 have some kind of tax on Social Security benefits.

District 16 Sen. Gary Dahms said there is significant migration out of Minnesota by seniors who are looking to cash in fully on their Social Security income since they can’t do it here. In other words, it’s not just the weather that drives people out of the state.

“They’re going to tax-friendlier climates,” he said. “Take a look at states with growth, and many of those states are ones that do not have that tax. This is a way of keeping our retired folks in Minnesota.”

Dahms said there are two versions of the bill – one that would spread over an eight-year period, the other, 10 years. The 10-year bill is the one being focused on.

Minnesota ranks fourth on Kiplinger’s list of “Least Tax-Friendly States for Retirees” while South Dakota is listed as one of the country’s most tax-friendly. South Dakota -along with two of Minnesota’s other neighbors, Iowa and Wisconsin – don’t tax Social Security income.

Southern states like Arizona, Florida and Texas – those known as havens for retirees from northern states – also do not tax Social Security benefits.

“Seventy percent of the people who collect Social Security would have a direct benefit by reducing the Minnesota state tax on Social Security,” said Dahms, R-Redwood Falls.

According to Kiplinger, Social Security income is taxed to the same extent as it is on federal returns in Minnesota. Pensions are taxable regardless of whether they are military, government or private pensions.

As of 2013, the state added a new top income tax rate and bracket for high incomers to add to what are already high income and sales tax rates.

Dahms said rural Minnesota cities need retirees in the community for a number of reasons, and calls retirees drivers of local economies. He said they spend their disposable income on recreation, clothes and groceries among other things.

“If you take a look at value in rural Minnesota, our communities rely heavily on the retiree population,” Dahms said. “In many of our communities, retirees make up a big share of the population. A lot of them do volunteer work, they’re active in their schools, in the churches. It’s very important we keep those people in our communities.”

Dahms said the bill would be funded from the General Fund. The two-year, biennium total of the bill would be in excess of $400 million, he said.

“The cost of doing this is very minimal, because of the fact that we’re keeping people in Minnesota,” he said. These people pay a lot of taxes – income tax, sales tax, property tax. The list goes on and on.”

The bill is Senate File 123.