Copyright © 2020 Albuquerque Journal
SANTA FE – Two bills aimed at easing the tax burden on New Mexico retirees eased through their first House committee Thursday, despite concerns that they could reduce how much money is available for public schools and other services.
Both measures, House Bills 29 and 77, are intended to reduce or repeal the state income tax on Social Security benefits that some elderly state residents have to pay.
Backers say fully exempting Social Security benefits from taxation would leave roughly $700 per year more in the pockets of seniors, many of whom showed up to testify at Thursday’s hearing of the House Labor, Veterans’ and Military Affairs Committee.
“Quite frankly, a lot of them get mad and some of them get depressed” when they find out Social Security benefits can be taxed in New Mexico, said Rep. Cathrynn Brown, R-Carlsbad.
However, critics, including representatives of New Mexico Voices for Children and the National Education Association-New Mexico, a leading teachers union, said the state already offers various tax breaks for low-income residents.
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.
A fiscal analysis of the proposal to fully repeal the Social Security tax could mean $128.5 million in reduced revenue for the state in the coming budget year, although backers of the bill dispute that figure.
Of the two bills approved Thursday on 9-0 votes, House Bill 29 would fully exempt Social Security benefits from taxation, while House Bill 77 would exempt up to $24,000 in Social Security income from being taxed.
Supporters of the measures say taxing Social Security benefits is bad policy, regardless of the budget hit.
“I do think it’s just wrong,” said Rep. Daymon Ely, D-Corrales. “You’re taxing people on fixed incomes.”
He also suggested that legalizing recreational marijuana use and taxing its sales could offset the forgone revenue from exempting Social Security benefits from taxation.
Nationally, 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according to Think New Mexico, a Santa Fe-based think tank that has advocated for the tax to be fully or partly repealed.
In all, six bills have been introduced at the Roundhouse 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.
Both bills approved Thursday now advance to the House Taxation and Revenue Committee.