Copyright © 2019 Albuquerque Journal
SANTA FE – Legislators explored ways Tuesday to make New Mexico more attractive to retirees, building on the bright sunshine and low property taxes.
But they clashed over whether adopting a tax break for Social Security benefits would be the right approach.
The discussion comes as lawmakers prepare for a 30-day session beginning Jan. 21, when a variety of proposals are expected to focus on the taxation of Social Security benefits.
Supporters of reducing the tax on Social Security income described it as a matter of fairness – a way to avoid the double taxation that occurs when people pay taxes as they put money into the system and then pay taxes again when they receive the benefit. Eliminating or reducing the tax, supporters said, would also make New Mexico more attractive to middle- and high-income retirees.
Fred Nathan, executive director of the nonpartisan Think New Mexico, said the state isn’t sharing in the broader national trend of adults 55 and older migrating to warmer regions across the South and Southwest. At the same time, he said, New Mexico is one of just 13 states that tax Social Security benefits.
“New Mexico is out of step with the vast majority of states,” Nathan told the Legislature’s Revenue Stabilization and Tax Policy Committee.
But some legislators pushed back against the idea of cutting taxes on Social Security income. They suggested the average $700 tax cut that would result from eliminating the tax wouldn’t be enough to lure out-of-state seniors.
Retirees “move because of the weather,” said Sen. Bill Tallman, D-Albuquerque. “They move because they want to be near friends, relatives and children.”
Other lawmakers discussed a number of tax options – such as eliminating taxes on military retirement income or targeted tax cuts focusing on low-income retirees – but didn’t reach consensus.
Removing Social Security benefits from state income taxes would cost New Mexico about $73 million a year in revenue. More targeted tax cuts – aimed at Social Security benefits for low- and middle-income seniors – would cost far less.
Nathan described the cuts as a potential economic stimulus – a move that would trigger more spending by seniors. It would also help address a broader crisis, he said, centering on Americans’ failure to save enough for retirement, an idea that resonated with some lawmakers.
Nearly two-thirds of New Mexicans, Nathan said, have saved nothing for retirement.
“More and more people depend on that Social Security payment to help them make it through life,” Republican Sen. Jim White of Albuquerque said.
At least one proposal exempting Social Security benefits from state income taxes has already been filed for the coming session: House Bill 29, sponsored by Rep. Cathrynn Brown, R-Carlsbad.