At least six bills have been introduced during this legislative session to repeal N.M.’s counterproductive tax on Social Security benefits. (While two were tabled by the House Taxation and Revenue committee Friday), we urge the Legislature to repeal this tax.
Research by Bob Grassberger, professor emeritus at the University of New Mexico, has found retirees benefit the economy by starting businesses, continuing to work part-time, and engaging in recreational activities. He estimates that every household of retirees in New Mexico generates half a job.
Every dollar of Social Security benefits generates about $1.71 in economic output, the money spent on goods and services like food, clothes, transportation and health care. The $4.86 billion in Social Security benefits going to New Mexicans every year generates about $7.66 billion in economic output, helping to support over 52,000 jobs, particularly in the health care, retail, food and beverage, and real estate sectors.
Repealing the tax on Social Security benefits would put $73 million back in the pockets of seniors. As seniors spend these dollars, they would generate approximately $125 million in direct economic output across the state. That economic activity would generate gross receipts tax, reducing the cost of the repeal.
Along with raising the incomes of seniors already here, ending the tax on Social Security would attract more middle-income and higher-income retirees.
According to a 2018 analysis by the Brookings Metropolitan Program, New Mexico is the only southwestern state not gaining seniors. Southern California, Arizona, Texas – not to mention Florida, Georgia, and Alabama – are seeing an influx of seniors from northern states. None of these states tax Social Security.
According to a 2016 analysis by U.S. News and World Report, New Mexico ranks favorably on many features seniors look for when considering retirement: temperate climate and weather, affordable cost of living, access to health care, cultural amenities, educational opportunities and recreation. The one area in which New Mexico falls short is tax friendliness.
The fact that New Mexico heavily taxes Social Security benefits is a major reason publication after publication ranks our state as one of the worst to retire in. Here are a few recent examples:
• In 2019, Moneywise ranked New Mexico 47th of the 50 states for retirement, writing: The state’s “rugged beauty will tug at your heartstrings to stay a while longer – but it might be best to just visit”
• Kiplinger’s has consistently ranked New Mexico in the five worst states to retire, writing in 2018: “The land of Enchantment is not a magical place for well-off retirees.”
• Yahoo Finance ranked New Mexico in the top worst states to retire: “Though retirement represents the end of one’s career, it doesn’t have to be the end of financial security, nor should it mean a lower quality of life.”
• The Balance ranked New Mexico in the 10 worst states to retire: “Most of the states on our list have been in the northern portions of the country, but there are some steer-clear states in the southern portion as well. Leading that charge is New Mexico.”
• Bankrate and WalletHub place New Mexico in the bottom 10 states to retire.
By making the state so unappealing to retirees, N.M’s tax on Social Security is a drag on a potential source of powerful economic growth.
Repeal this double tax and unlock New Mexico’s potential as a destination for retirees and the jobs they create.
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