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Doña Ana County Commissioners Ask NM Legislature to Repeal State Social Security Tax

Dec 12, 2019

New Mexico, along with Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, Rhode Island, Utah, Vermont and West Virginia tax income on Social Security in varying ways. West Virginia's state Legislature passed a law in March to eliminate state income tax on Social Security by 2022.
Credit U.S. Citizenship and Immigration Services

Social Security is a critical form of income for thousands of retired New Mexicans–for some seniors, it’s their only source.

But New Mexico remains one of 13 states that tax income from Social Security.

The Doña Ana County Board of Commissioners unanimously passed a resolution asking Gov. Michelle Lujan Grisham to add the repeal of the state tax to the 2020 Legislative Session agenda.

“This is my resolution and I recently learned that the City of Las Cruces enacted a similar resolution and I think it would be fitting for the county to follow up," County Commission Chair Lynn Ellins said.

Ellins said he draws Social Security along with his wife. He cited a letter from Think New Mexico, a Santa Fe-based public policy group that asked the commission to pass the resolution.

“Taxing Social Security undermines the purpose of the Social Security program which was designed to lift seniors out of poverty," Ellins said. "Finally, the New Mexico Social Security tax has a negative impact on the state and local economy. If seniors in our community were able to keep the money that they now pay in taxes much of it would be spent immediately and those dollars would go right back into the local economy."

Think New Mexico added that taxing Social Security is double taxation, since residents pay income tax on the money that comes out of their paychecks and then again when they receive those benefits.

Clinton Turner is tax policy director for the New Mexico Taxation and Revenue Department. 

“It's taxed like all other income. Whether you get that income from Social Security or from wages, that's going to be considered the same," Turner said referring to how the state taxes Social Security.

Personal income tax rates range from 1.7 to 4.9 percent, depending on the tax bracket. Turner said those taxes go to the state’s general fund. Along with the standard deduction, he said taxpayers 65 and older may qualify for other deductions.

“So, the biggest difference is going to be what your total income is and whether that gets completely taken care of with the standard deduction or with that additional $8,000 deduction that New Mexico adds onto that to get down to your taxable income," Turner said.

Yolanda Valenzuela and her husband draw about $2,000 a month in Social Security.

“As a retiree, that’s what we rely on. That’s what we worked for all those years and the money coming in is what sustains us," Valenzuela said.

The 69-year-old said she feels blessed to have a comfortable income–but realizes thousands of other seniors don’t. She said untaxed benefits would help her cover medical expenses.

“Well, of course it would help us. It would help with the cost that we have for medications. My husband has heart disease and so we’re at the doctors quite a bit with him having tests constantly. So, it helps with medication, it helps with the doctor’s fees," Valenzuela said. "It would definitely ease the tightness that you experience in just trying to live day-to-day.”

Thousands of seniors in poverty are feeling that tightness. In 2017, New Mexico had the third highest poverty rate for people 65 and older at 12.2 percent, according to a 2019 U.S. Census Bureau report.

The state’s income tax costs the average Social Security recipient $700 a year, according to Think New Mexico. District 3 County Commissioner Shannon Reynolds said that number only tells a partial story.

“That’s probably not the whole picture. Because the whole picture is that a lot of our seniors are on such low income and dependent on Social Security to the point where they have to make a decision–do they buy medicine or do they buy food?" Reynolds said. "And when you think about an individual and $700, I mean you’re talking about a month’s worth of food that they could actually afford or medicine that they could afford with $700 more a year.”

But some critics of a Social Security tax exemption said the loss of tax money would increase reliance on oil and gas revenues.

Citing a state analysis by the Legislative Finance Committee, Think New Mexico said repealing the tax would decrease state revenues by $73 million a year.

But the think tank estimated that number would drop to between $21-29 million if New Mexico passed a law that exempts low and middle-income residents from the tax, as other states have done. The group said that decrease represents about one-third of 1 percent of the state’s $7 billion budget.

For Reynolds, who also draws Social Security, it’s important that seniors get the most from their benefits. While many senior incomes are fixed, Reynolds added the cost of living is not.

“The cost of living keeps going up. The COLA that’s actually applied to the Social Security doesn’t seem to be enough to actually make a difference. And with the increased cost of food, the increased cost of medicines, it’s imperative in my opinion that we actually give some money back or allow the residents that live on Social Security to have all the money they can get," Reynolds said.