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Monday's state budget forecast could affect lawmaker's plans for state surplus

Both Republicans and Democrats have laid out plans for how they feel the projected $7.7 billion dollar surplus should be used.

ST PAUL, Minn. — An update from Minnesota's state budget officials could impact the ways lawmakers plan to spend the $7.7 billion dollar surplus. 

House and Senate DFL leaders and Governor Tim Walz are planning to speak about the budget forecast Monday. Both Republicans and Democrats have their plans for utilizing the billion in surplus. 

Gov. Walz wants to return the money to taxpayers in the form of a one-time rebate check. Under the governor's plan, a married couple earning up to $273,470 per year would receive $350, while a single person making up to $164,400 would get $175.

RELATED: Walz details plan to expand economic opportunities as part of new budget package

Under the GOP plan, taxpayers would get a cut to their income tax. 

Senate Majority Leader Jeremy Miller and Minnesota Republicans want to cut the state's first tier tax rate from 5.35% to 2.8% beginning with the current tax year. The first-tier rate applies to the first $41,000 of your income if you're filing a joint return, or the first $28,000 of your income if you're a single filer.

The senators said the average Minnesota family with a $75,000 income would see a tax cut of $908 per year, which would show up in paychecks as soon as the bill is passed and signed into law.

Republicans also want to exempt all Social Security income from state taxes, which would use $539 million of the current surplus, and also be ongoing year after year.

RELATED: Republicans pitch state income tax cuts

Both Democrats and Republicans have additional ways they want to spend the money, but tax cuts are top of mind.

Another way lawmakers want to save Minnesotans money is a proposed "gas tax holiday." Prices at the pump have been steadily rising, partially fueled by worries over the Russian invasion of Ukraine, and some lawmakers think that suspending the tax from Memorial Day through Labor Day would be a boon to working families. 

Currently, motorists pay 28.5 cents in state taxes plus 18.4 cents in federal taxes on each gallon of gasoline they pump. The money is dedicated solely to roads and bridges and is considered a user fee because the people who use the roads pay for the upkeep via the fuel tax.

"That will provide real relief to working families, help them balance those family budgets as we’re seeing gas prices rise even higher due to the war that’s going on in Ukraine," Rep. Zack Stephenson of Coon Rapids told KARE 11 last week. 

Rep. Stephenson said the gas tax holiday would cost MNDOT roughly $200 million in lost revenue, which he proposes replacing with an equal amount from the General Fund.  

RELATED: Lawmakers pitch gas tax holiday in Minnesota

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