Social Security Benefit Taxes: Could New Mexico Phase Them Out Thanks to Competing Bills?

Senior woman looking at check received in the mail

The battle over Social Security income taxes is playing out in the Land of Enchantment, as lawmakers in New Mexico consider doing away with the state’s taxes on Social Security benefits.

See: Social Security Taxes Far From Enough To Secure Gig Workers in Retirement
Find: All the States That Don’t Tax Social Security

In New Mexico, personal income taxes apply to Social Security benefits on all but lower-income residents, U.S. News & World Report noted. Individuals earning up to $25,000 and joint tax filers earning up to $32,000 get a full exemption.

But legislators in the state have introduced competing bills to end the tax on Social Security benefits. Gov. Lujan Grisham last week threw her weight behind a bill from state Sen. Michael Padilla to enact a full and immediate tax exemption for Social Security income.

A separate bill from Sens. Bill Tallman and Martin Hickey would end taxes on Social Security income for everyone except higher-income households. A third bill, backed by gubernatorial candidate Rep. Rebecca Dow, would phase out state taxes on Social Security income gradually between 2022 and 2026.

Retire Comfortably

New Mexico is one of 13 states that have some kind of tax on Social Security benefits, KRQE reported, citing comments from Dow. Critics say the tax hurts the state’s ability to attract more retirees, which is one reason there is bipartisan support to get rid of it.

Ending the tax would cost the state anywhere from $70 million to $90 million in yearly revenue, according to at least one analysis. But supporters of the bills say that shortfall would be offset by New Mexico’s general fund surplus of roughly $1.6 billion.

See: You Should Check Your Social Security Balance Regularly — Here’s Why
Find: 5 Things Most Americans Don’t Know About Social Security

“We have what’s called a ‘silver tsunami’ coming, where the majority of living citizens in the U.S. will be retirees, and so they’ll be senior citizens by definition and we want to attract them to retire in New Mexico,” Dow told KRQE.

More From GOBankingRates:

Retire Comfortably

Share this article:

Retire Comfortably

About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
Learn More