Social Security tax cut is gaining support - Albuquerque Journal

Social Security tax cut is gaining support

Copyright © 2020 Albuquerque Journal

SANTA FE – Momentum appears to be building at the Roundhouse to exempt New Mexicans’ Social Security benefits from taxation, but changing the law this year might prove to be a tough task.

Already, at least six bills have been introduced seeking to repeal or reduce the state’s tax on Social Security benefits, and several cities and counties around New Mexico have passed resolutions supporting the effort.

“These retirees are living off Social Security and having to pay taxes on it,” said Rep. Gail Armstrong, R-Magdalena, who is sponsoring two of the measures that are scheduled to get their first committee vetting Thursday.

She said eliminating the tax would make New Mexico more attractive to retirees, while also providing a financial break to those already living in the state.

The tax relief push is also getting support from leading lawmakers.

“It has a lot of traction and I support it 100%,” House Speaker Brian Egolf, D-Santa Fe, told reporters earlier this week.

However, he said it might be difficult to immediately absorb the estimated $75 million revenue hit that fully exempting Social Security benefits from taxation would pose, even though the state has $797 million in projected “new money” for the coming budget year.

That’s because state agencies and legislative committees had already started work on a budget bill for next year by the time the idea was floated last fall.

It’s more likely a bill dealing with taxing Social Security benefits would be passed in the 2021 session, when it could be combined with a tax exemption for military veterans, Egolf said.

New Mexico’s personal income tax was not levied on Social Security benefits until 1990, when a provision buried in a tax bill triggered the change.

While Social Security benefits are subject to taxation in New Mexico, there are several existing income tax deductions available to retirees – including a low-income senior deduction that can be as large as $8,000, depending on income levels.

In all, a current retiree filing individually with up to $25,000 in income – including Social Security benefits – would not have a tax liability if they claim all available tax breaks, according to the Taxation and Revenue Department.

Meanwhile, New Mexico is one of only 13 states that tax Social Security benefits, according to Think New Mexico, a Santa Fe-based think tank that has advocated for the tax to be fully or partially repealed.

Fully eliminating the tax would keep nearly $700 a year in the pockets of the average senior, according to the group.

“We have been deluged with positive feedback from the public who want this double tax repealed,” said Fred Nathan, the executive director of Think New Mexico. “I suspect that legislators are hearing the same thing, which may explain why six of them from both parties and both chambers have introduced bills.”

Tripp Stelnicki, a spokesman for Gov. Michelle Lujan Grisham, said Friday the first-term Democratic governor is open to various proposals to revamp New Mexico’s tax code, including the tax on Social Security benefits.

But he said that tax advisory committees established at the direction of Lujan Grisham last year should have ample time to study tax proposals before adopting piecemeal changes.

“I think our process will bear fruit,” Stelnicki said.

Currently, there are an estimated 120,000 New Mexicans age 65 and older, and roughly 12% of those individuals are below the federal poverty line, according to a 2017 U.S. Census Bureau survey.

And the number of senior citizens living in the state has steadily increased in recent years, while New Mexico’s overall population has grown at a slower rate.

New Mexicans age 65 or older were estimated to make up 17.5% of the state’s population as of last year – up from 13.2% in 2010 and 11.7% in 2000, according to the U.S. Census Bureau.

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