Exempting all Social Security Income from Tax Won't Help Seniors Who Need it Most
Commentary: Social Security has done a remarkable job keeping the vast majority of seniors out of poverty. Those seniors who still live in poverty should receive more help from the federal and state governments. But exempting all Social Security income from taxation won’t deliver one penny of help to our low-income seniors. What it will mean is the state will have less money to support the programs and services that matter most to our communities.
Most seniors earning low incomes – and even many earning middle incomes – are already exempt from paying income tax on their Social Security benefits. The vast majority of the benefit from this proposed tax cut would go to seniors earning $50,000 and up, more than the state’s median income. More than half of the benefit would go to those in the top 20% of the income ladder. And even for those at the very top, the portion of their Social Security benefit that they already paid taxes on while they worked is exempt from this tax.
And in addition to not helping those in our communities who need it most, this proposed tax cut would be expensive – costing at least $120 million every year. That’s a recurring New Mexico revenue loss each year – $120 million that could be put toward classrooms, parks, meal programs, hospitals, and basic infrastructure. And that $120 million is two-and-a-half times the budget for the Aging and Long-Term Services Department, which provides numerous services for seniors. When we underfund these essentials, we not only harm the families and communities that rely on them, but we also harm our economy. We lose jobs and, with them, we lose the income that they pump into our businesses. We also lose young people who have to go elsewhere in order to find jobs that will pay them enough to support themselves and their families.
I know it’s tempting to enact tax cuts when the state coffers are full. But as we know too well, while the needs of our families for good schools, safe roads, and quality health care remain constant, the money we take in can vary widely from year to year because we are so reliant on a volatile source like oil and gas. Tax cuts last forever, but the financial situation the state is in right now may change in a few years when federal subsidies decrease and the oil and gas industry suffers a dip again. The programs that we support – education, health care, public safety, and our Aging and Long-Term Services Department – need robust and consistent funding year over year if they are to offer the same level and quality of services for our families, neighborhoods, and fellow community members.
If we want to help our low-income seniors – or any of our low-income residents, for that matter – the best way to do that is to increase the tax credits and rebates that are specifically targeted to them and to ensure we have adequate revenues to invest in the programs and services that matter most to them. When we put our efforts in that direction we not only help those among us who most need the help, but we also build a better future for the whole state.