Home State/Regional News New Mexico may limit or scrap tax on Social Security income

New Mexico may limit or scrap tax on Social Security income

7 min read
0
321

MORGAN LEE Associated Press

SANTA FE, N.M. (AP) — Legislators are introducing competing proposals to do away with New Mexico’s tax on income from Social Security benefits as Gov. Michelle Lujan Grisham throws her political weight behind the idea in an election year.

About a dozen states tax Social Security benefits in some fashion. In New Mexico, personal income taxes apply to Social Security benefits while following federal rules for exempting lower-income residents. A full exemption applies to individuals earning up to $25,000 and joint tax filers earning up to $32,000.

Lujan Grisham on Thursday signaled her support for an immediate and full tax exemption for Social Security income, under a bill from Democratic Sen. Michael Padilla of Albuquerque, in a news release.

That fiscal relief would be concentrated among higher earning individuals. Last year, the state Taxation and Revenue Department calculated that 82% of taxable social security benefits are received by residents with income over $50,000 a year.

The state would forego roughly $90 million in tax revenue from a full repeal, according to a 2021 analysis. That estimate came prior to notification that Americans will receive a 5.9% increase in benefits in 2022 to counter inflation.

Proposals for tax cuts coincide with a major surplus in the state general fund — estimated at $1.6 billion in excess of annual spending obligations. But leading lawmakers are wary of eroding dependable sources of state income under a volatile state economy tied closely oil and natural gas prices and production.

“I’m going to take a hard look” at the proposals to exempt Social Security from taxation, said Democratic Sen. George Muñoz of Gallup, chairman of the lead Senate budget writing committee. “I want to see who truly benefits and what the true costs are to the state.”

He said low-income people who use Social Security as a lifeline won’t benefit. Meanwhile, the elderly in New Mexico can count on other financial relief from Medicare benefits, along with tax-free groceries and medical supplies.

A bill from Democratic Sens. Bill Tallman and Martin Hickey of Albuquerque would do away with some taxes on Social Security income — though not for individuals earning over $72,000 or joint filers earning over $124,000. State government income would be bolstered by changes to taxation of tobacco under the proposal.

One bill from conservative-leaning legislators including gubernatorial candidate and Rep. Rebecca Dow of Truth of Consequences would phase out state taxes on Social Security income gradually between 2022 and 2026. They also offer an immediate repeal in a separate bill.

Sen. David Gallegos, R-Eunice, introduced Senate Bill 121 on Thursday to repeal the existing tax on social security benefits in New Mexico.

“There has never been a more important time to give our seniors some tax relief, especially those who are caregivers and those on a limited, fixed income,” said Gallegos. “For our matriarchs and patriarchs who cannot afford to give up a cent of their fixed income, but do so anyway, we are fighting for you.

“To those in our state who care for your grandchildren, we are here to fight for you. And for those looking for condos in Florida and Texas the day you retire, please wait, because we want you to stay home.”

In a state of 2.1 million residents, about 450,000 people in New Mexico receive Social Security benefits. A worker’s lifetime earnings largely determine the amount of Social Security benefits received.

New Mexico began taxing Social Security income in 1990. Lujan Grisham is seeking election to a second term at the polls in November.

Load More Related Articles
Load More By Hobbs News-Sun
Load More In State/Regional News
Comments are closed.

Check Also

New Mexico wildfire advances in Rocky Mountains foothills

By SUSAN MONTOYA BRYAN Associated Press The largest wildfire burning in the United States …