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House panel rejects Social Security tax cuts

Copyright © 2020 Albuquerque Journal

SANTA FE – Legislators on Friday blocked two proposals that called for easing the tax burden on retirees, arguing the ideas need further study before passage.

The legislation, House Bills 29 and 77, called for repealing or reducing state income taxes on Social Security benefits.

But members of the House Taxation and Revenue Committee said the state needs to evaluate how to offset any revenue lost through the potential tax cuts. Both bills were tabled without opposition – a procedure that prevented the legislation from advancing to the House floor.

“This is a discussion were going to have to have going forward,” said House Minority Whip Rod Montoya, R-Farmington.

Rep. Jim Trujillo, a Santa Fe Democrat and co-chairman of the taxation committee, said lawmakers must scrutinize targeted tax breaks and consider their impact on the state’s ability to pay for services. He said he was skeptical that previous packages of tax cuts – on personal income taxes and groceries, for example – had resulted in the economic growth that supporters had promised.

Trujillo suggested that lawmakers find a way to make up the lost revenue – either through other tax changes or cuts in spending – before enacting the proposed tax cuts.

“You can’t have it both ways,” Trujillo said. “Somewhere you have to pay the piper.”

Supporters of the bills, in turn, said it was simply good policy to reduce or repeal the tax on Social Security benefits that some elderly state residents have to pay, especially as the state enjoys a revenue boom from oil and gas development.

Rep. Cathrynn Brown, a Carlsbad Republican and co-sponsor of House Bill 29 to fully exempt Social Security benefits from taxation, said her proposal would provide seniors an average of $700 a year. Full exemption, she said, would make it easy to market New Mexico to retirees and help those already here.

“I think we should make it simple if we’re going to do this,” Brown said.

Fully repealing the Social Security tax could mean $89 million in reduced revenue for the state in the coming budget year, legislative analysts said. Supporters of the bill disputed that figure, however, arguing that it didn’t take into account the possibility of increased spending by seniors or other factors.

Rep. Daymon Ely, a Corrales Democrat and co-sponsor of House Bill 77, proposed a limited approach – exempting up to $24,000 in Social Security income from state taxation. It could be an initial step to help those most in need, he said, as the state considers broader changes.

“We are taxing people on fixed incomes,” Ely said. “It’s one of the many things that’s wrong with our tax policy.”

Both proposals were tabled by the committee – meaning they cannot advance, but lawmakers have the option of reviving the bills at some point, though that’s rare.

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