Both Candidates Agree: New Mexico Should Stop Taxing Social Security Income
By Fred Nathan
As the special election to fill New Mexico's First Congressional District heats up, an important area of bipartisan common ground has emerged: both Democratic Representative Melanie Stansbury and Republican Senator Mark Moores are emphasizing their support for repealing New Mexico's tax on Social Security income.
During the last two legislative sessions, nine bills were introduced to repeal this tax, sponsored by lawmakers from across the political spectrum. Unfortunately, despite the strong bipartisan support for this reform, New Mexico remains one of 13 states that taxes Social Security benefits. Of those states, New Mexico has the second harshest tax, costing the average Social Security recipient nearly $700 a year.
New Mexico has taxed Social Security benefits since 1990, when the legislature imposed the tax to close a $13 million shortfall in the state budget. The tax was enacted as a single line on the second to last page of a long and complex tax bill, and it received no public scrutiny until seniors began filing their taxes the following year.
Think New Mexico unearthed this history two years ago, when we published a policy report detailing the history and impact of New Mexico's tax on Social Security income. In that report, we recommended that the state repeal the tax as part of a larger strategy to enhance retirement security for New Mexico seniors.
The tax on Social Security income is particularly unfair because the majority of seniors are trying to survive on Social Security alone. Nearly two thirds of New Mexicans have nothing saved for their retirement, and about 80% of New Mexicans have $10,000 or less saved for their retirement.
Taxing Social Security benefits undermines the purpose of the Social Security Act, which was designed to lift seniors out of poverty – not to fund state government. Because Social Security is a federal program, state governments do not administer the program and have no costs for administering or any justification for taxing it. No other public benefits, like Medicare, Medicaid, TANF, and food stamps, are taxed by the state.
New Mexico's tax on Social Security benefits is a double tax on individuals. When New Mexicans are working, the state taxes the money that is taken out of their paychecks for Social Security. Then, when they retire, they are taxed again on the benefits they receive.
Most of the people paying this tax in New Mexico are middle and lower income. The tax is particularly burdensome for the 55,000 grandparents who are the primary guardians for their grandchildren. More than one out of every ten children in New Mexico is being raised by their grandparents, and many of these seniors are sacrificing to meet the financial needs of their grandchildren without outliving their savings.
All New Mexicans would benefit from the economic development boost of repealing New Mexico's tax on Social Security income. If seniors were able to keep the money that they now pay in taxes on their Social Security benefits, much of it would be spent immediately and those dollars would go right back into New Mexico's economy, supporting local jobs.
We hope that the governor and the rest of the legislature will follow the lead of Senator Moores, Representative Stansbury, and the more than a dozen legislators who have sponsored bills to repeal the tax on Social Security income, including Senators Pete Campos (D-Las Vegas), David Gallegos (R-Eunice), Michael Padilla (D-Abuquerque), Liz Stefanics (D-Cerrillos), and Bill Tallman (D-Albuquerque), and Representatives Gail Armstrong (R-Magdalena), Cathrynn Brown (R-Carlsbad), Jack Chatfield (R-Mosquero), Randal Crowder (R-Clovis), Rebecca Dow (R-Truth or Consequences), Daymon Ely (D-Albuquerque), Candy Spence Ezzell (R-Roswell), Day Hochman-Vigil (D-Albuquerque), Randall Pettigrew (R-Lovington), and Linda Serrato (D-Santa Fe).
Repealing New Mexico's tax on Social Security income should be at the top of the agenda for next year's legislative session. You can learn more and email your legislators and the governor from Think New Mexico's website at: www.thinknewmexico.org.
Fred Nathan is Executive Director of the independent, nonpartisan, results-oriented think tank Think New Mexico.