A bill to repeal New Mexico’s Social Security income tax on middle- and upper-income citizens died in committee Tuesday, illustrating the unwillingness of many Democratic legislators.
A state House committee rejected to sign a bill that would gradually roll out the tax by 2026, preventing further discussion on a 4-4 tie with Democrats opposing. Albuquerque Democratic state Representative Miguel Garcia joined three Republicans in agreement.
Possible outcome if Social Security income tax was repealed
Democratic Governor Michelle Lujan Grisham proposed a Social Security tax cut in her State of the State speech earlier this month, and companion Democratic bills are awaiting their first public review in the Legislature. Low-income residents are already excluded from the levy.
According to AP News, state tax officials said that eliminating the Social Security benefits’ income tax could cut annual general fund revenues by much to $160 million by 2026. Republicans who sponsored the tax-cut legislation said the moment is right, citing inflationary strains on household budgets and rising state government revenue. They also claim that the bill will assist the state in retaining and attracting retirees.
State Representative Cathrynn Brown claimed in an interview with KOB4 that a lot of retirees would be encouraged to move or stay in New Mexico and would help those with fixed income by eliminating the tax.
The governor and key legislators are seeking a $1 billion boost in general fund expenses for the upcoming fiscal year, which begins on July 1, 2022, owing to a surplus in state government income mostly due to oil output and federal government spending.
The finance and accountability office of the Legislature warned that the planned tax cut could make meeting future social spending obligations more difficult.
A dozen additional states have some form of Social Security taxation. Personal taxes attach to Social Security benefits in New Mexico, although lower-income residents are exempted under federal guidelines. Elderly people with incomes equivalent to $38,600 for singles and $52,200 for couples are eligible for broad state tax exemptions.
A plan introduced by Albuquerque Democratic Senators Bill Tallman and Martin Hickey would eliminate some Social Security taxes — but only for individuals earning more than $72,000 or joint filers income more than $124,000. The idea would increase state government revenue by changing cigarette pricing.