House Speaker Brian Egolf said Tuesday legislation proposing a tax exemption for Social Security income is gaining support.
“It has a lot of traction, and I support it 100 percent,” said Egolf, D-Santa Fe.
House Bill 77, sponsored by Reps. Daymon Ely of Corrales and Dayan Hochman-Vigil of Albuquerque, and Sen. Bill Tallman of Albuquerque, all Democrats, would allow people to exempt up to $24,000 in Social Security income from tax. Allowing that level of exemption would cost the state $75 million to $80 million, Egolf said.
Three similar bills have been filed. Senate Bill 68 would allow $25,000 in exemptions, while Senate Bill 81 and House Bill 29 propose to completely eliminate tax on Social Security income.
Only 13 states, including New Mexico, have a tax on Social Security income, according to the nonprofit Think New Mexico.
“It is a form of double taxation since New Mexicans pay income taxes on the money they put into Social Security and then they are taxed again on the benefits they receive,” the Santa Fe-based think tank wrote in a report earlier this month.
Tallman, D-Albuquerque, said his bill would benefit 80 percent of New Mexicans.
He added that the cost of the measure could come from the “new money” the state is projected to receive in fiscal year 2021, a windfall that is driven by the oil boom in the Permian Basin.
“As far as where the money comes from, it’s covered by the surplus,” Tallman said.
Egolf said, however, there’s a possibility the initiative could be postponed until next year’s 60-day legislative session because conversations about the proposal didn’t take place until after “a lot of work had already been done on the framework for the budget.”
“Finding that money in this session is going to be tricky,” he said.
The speaker added he would like the proposal to be combined with a measure to remove taxation on benefits for military retirees.
On another note, Egolf said there are currently discussions among lawmakers about the possibility of tapping the state’s Tax Stabilization Reserve as a source of funding for infrastructure projects.