A guest column in the Oct. 23 Journal proposed exempting Social Security benefits from the state income tax as a way to assist New Mexico seniors who live in poverty. That proposal is misinformed and flawed.
Based on 2018 data, New Mexico now ranks 17th-highest – not third highest – in the nation for the percentage of seniors living in poverty. The percentage of poor seniors in New Mexico is now 10%, not much different from the national average of 9.7%.
Further, 16.6% of all New Mexicans live in poverty, 24% of all New Mexico children under age 18 live in poverty, and New Mexico leads the nation with 36.2% of children under age 5 living in poverty. New Mexico’s poverty problem is not principally within the senior demographic.
The loss of $73 million in state tax revenues from this proposal would reduce the amounts of money available for state spending, including educational, health care and child care programs benefiting poor New Mexicans. It would make New Mexico even more dependent upon oil and gas revenues. And the tax exemption for Social Security benefits would open the door to further erosion of the state income tax base, as there will certainly be efforts to exempt other retirement income, such as pensions for military, first responders, educators and other state and local government employees.
More to the point, most poor seniors do not pay state income tax now on Social Security, so they would receive no benefit from this proposal. In 2016, the IRS reported 242,340 tax returns from elderly taxpayers in New Mexico, while just 127,870 of them, 52.8%, reported taxable Social Security income on their federal income tax return – the basis for the New Mexico income tax. And of those 127,870, IRS data indicate that only 14,100 had adjusted gross income less than $25,000 and reported just 1.43% of all taxable Social Security income for all New Mexicans.