New Mexico Bill Would Eliminate Tax on Seniors
- Author: Mary Singleton
- Posted: 2024-06-01
Purpose of New Mexico House Bill 48
Legislators in New Mexico who are in favor of House Bill 48 argue that eliminating the income tax on social security benefits for senior citizens would attract more seniors to the state. Arizona is already a haven for retirees, and New Mexico would like to grow its population of seniors who choose to retire in the state. Eliminating the tax would make New Mexico more competitive with the neighboring states that do not levy a tax on Social Security Income.
What the Lawmakers Say
Representative Dow states that the most recent fiscal report for the state of New Mexico found that eliminating the income tax on Social Security income would cost the state an estimated $70 million each year. As of 2022, the state has a $1 billion surplus, so it can afford to lose that amount of revenue this fiscal year. Representative Dow went on to explain that the revenue would be made up in other ways, such as when retirees buy a home, go shopping, go out to eat and otherwise contribute to the state's economy.
Why the Tax Cut Is Important to Senior Citizens
In 20 years, senior citizens will comprise the majority of the American population. Representative Dow states that they are a silver tsunami. Their purchasing power, political power and numbers will make them a huge economic force. Passing this law now will also help those who are already in their senior years of living. By attracting more older people to New Mexico, Representative Dow believes that the state's economy will grow.
Bipartisan Legislative Support
These days, it is rare for a bill to be touted by Democrats and Republicans. House Bill 48 has bipartisan support. In the state senate, Republicans have introduced a similar bill. The governor, Michelle Lujan Grisham, has reached out to lawmakers to encourage them to pass the bill and end the tax on Social Security income.
How Social Security Benefits Are Taxed
Some people have to pay federal income taxes on their Social Security benefits. Only 85% of Social Security income is taxed, and for some lower earners, the proportion is as little as 50%. The exact rate of taxation depends on whether or not a senior citizen has income from other sources, such as investments or a pension. The income tax rate on Social Security income also varies based on the senior citizen's tax filing status. Each year, senior citizens who receive payments from the Social Security Administration get a paper or electronic Social Security Benefit Statement (Form SSA-1099). This form is required for filing the federal tax return.
New Mexico Tax Rate on Social Security Benefits
In New Mexico, personal income taxes are applied to Social Security income of more than $25,00 for a person filing individually or $32,000 for couples filing jointly or singles filing as head of household. This is the same as the federal rule for taxing social security income.
Who Would Benefit the Most From New Mexico's House Bill 48
The New Mexico Taxation and Revenue Department calculated that if House Bill 48 passes and is signed by the governor, 82% of the reduction in income taxes would apply to people earn more than $50,000 per year in Social Security benefits or Social Security combined with other sources of income. Only 18% of the tax reductions would benefit people earning $25,00 to $49,999. Some of the bill's critics cite these numbers when stating that House Bill 48 would not benefit lower income earners as much as it will benefit middle and upper income earners. They argued that people who get more than $50,000 per year in Social Security benefits likely also have other sources of income, such as stocks and investments, and they aren't relying on their Social Security income to put food on the table or fuel in the car.
What Naysayers Argue
Opponents of House Bill 48 don't think it's a good time to cut revenue. They state that in a wild economy, cutting revenue is an unwise decision.
