A state income tax on New Mexicans’ Social Security benefits would be eliminated for most seniors under one of the first bills to be filed ahead of the upcoming 30-day legislative session.

While the proposal is designed to put more money in seniors’ pockets, it would cost tobacco users more.

The proposed legislation by Sen. Bill Tallman, D-Albuquerque, calls for increasing the tax on cigarettes and other tobacco products to make up the loss in state revenue.

Tallman listed multiple reasons for championing the bill, including the fact that New Mexico remains one of only 13 states to tax Social Security benefits, but he said it’s also just the right thing to do.

“Thirty percent of the retirees in New Mexico are living on Social Security only, and the average annual payment is only about roughly $14,000, which obviously does not secure you a high standard of living, so to tax that makes it even worse,” he said.

The push to repeal the tax comes after previous efforts in the Legislature have stalled.

“We’ve been very surprised at how difficult it’s been to gain traction with this because it makes so much sense,” said Fred Nathan, executive director of Think New Mexico, a Santa Fe-based think tank that developed the proposal after recommending the reform in a 2019 policy report.

According to the report, the income tax was part of a “long and complex bill” lawmakers passed in 1990.



“A single line on the second to last page of Senate Bill 310 quietly repealed New Mexico’s tax exemption for Social Security benefits,” the report states. “The bill passed and was signed into law with no public reporting on the new tax on Social Security benefits.”

Tallman called it double taxation.

“You’ve already paid tax on it [while working], and now you’re paying again [in retirement],” he said.

Tallman said the reason the tax hasn’t been repealed in the past is because “leadership” doesn’t want to lose the revenue.

“Well,” he said, “we’ve given them a pathway to have their cake and eat it, too, by increasing the tax on tobacco, which will offset the losses in Social Security payments.”

Tallman noted the tax will still affect about 10 percent of seniors.

The bill would exempt the tax on seniors whose incomes don’t exceed $72,000, or $124,000 for a married couple.

“Based on recent IRS data, this exemption would cover all but about the top 10 percent of wealthiest seniors in New Mexico,” a news release states.

Follow Daniel J. Chacón on Twitter @danieljchacon.

(19) comments

Richard Irell

All sources of income should be taxed equally. If you want to help ALL low income folks through tax policy, lower or eliminate the income tax on the first 14k or so and have a very progressive tax structure.

Emily Koyama

Technically speaking, social security is not income....since it is money that we have paid in for a lifetime of work.

If we are going to call it income, then should I pass away a month after I start receiving social security, my family should get every dime I paid into social security minus that 1st check...plus interest.

Mike Johnson

[thumbup]Exactly Ms. Koyama. And isn't it curious that the money for SS comes directly from us and our employers through our hard work and achievement over the many years, but after the government gets it, it becomes theirs to do with as they like. Another unique feature of it, and also something that should be changed.

Al Chavez

It's a good proposal. Truth be told not all of us will be hurt much if we pay taxes on our SS income. But those operating on a much smaller income deserve the break. And while they're at it, fix another horrible tax: the gross receipts tax. Low income people pay a far greater percentage of their income via this tax than better-off folks do.

Those who cry "socialism!" need to cool it. It's all about fairness, not some scary political Bogeyman.

Ernest Green

The legislator's statement is factually incorrect “You’ve already paid tax on it [while working], and now you’re paying again [in retirement].” Fully half of social security benefits are paid by the employer, and are deductible as a business expense. Another significant piece of these benefits comes in the way of decades of compounding interest. If one were to sketch out what was 'paid in' and what is paid out over retirement years the difference here is quite obvious ($50K over 40 years yields $124,000). Bad faith legislation is not sensible or prudent, and retirees who feel they're getting a raw deal somehow on a benefit system that won't exist for their grandchildren really ought to reevaluate.

Mike Johnson

When I retired, and got a look at my SS payments I took my contributions (and tax was paid on those) as well as my employer's annually, and used the average % annual return rate I had gotten over 35 years in my investment portfolio. Not surprisingly, if I had been able to invest this money myself, I could have had 4 times more to live on compared to the government SS payments schedule for the rest of my lifetime. And that was not counting the tax cut NM takes away every year. No, taxing SS is not a good thing for anyone, and SS is a forced savings plan, one size fits all (typical socialist), that is not the optimum savings plan available to anyone.

Ernest Green

You prefer to disregard the contribution-to-benefit numbers, substituting this with an argument for higher-risk vs low-risk investment returns (for retirees?), and denounced the program itself as socialist? It is a social benefit program so you're not wrong here. Not a bit of this explains why an exemption of tax for one demographic is needed at the exclusion of all others. Nor why the legislator misleads with the idea of double-taxation. The primary rationale for this tax cut would be equity for low-income seniors (pre-text really for pandering to higher voting demo), you however see equity as inherently bad (socialist) but that the tax cut remains necessary for ??? reasons that remain unclear.

Richard Irell

Social Security is much more than a savings plan. It is an insurance plan as well. Ever hear of SS Survivors Benefits. What about SS Disability Insurance?

SS is the primary source of income for lots of people. Yes, you could have done better investing the SS contributions, as could I, but our contributions have helped lots of others. I know you would prefer to live in a Dickensian horror of a world and probably think of Scrooge as a sympathetic character (pre-enlightenment), but lots of us are very happy living in a world without poor houses, child labor, etc.

Mike Johnson

I would say that any independent retirement account has the same features of survivor benefits through inheritance, but of course there are many who want that taxed too. But again, I don't see it as the governments job to redistribute wealth to each according to need, from each according to ability. You know what that is, and that is much of what is going on here.

Jerry Appel

Love this revenue neutral tax cut. Sadly, by increasing taxes on cigarettes the poor will be hit hardest. Perhaps this tax should be levied on cannabis instead.

Mike Johnson

[thumbup]Taxing smoking dope is a much better idea.

Richard Reinders

Let’s tax all gasoline sold in the state, it should cover the gap.

Mike Johnson

We should find a way to tax electric vehicles, as they pay no gasoline tax and yet use our roads, bridges, infrastructure as ICE vehicles do. Why are the people who can afford the most expensive cars getting a free ride?

Mike Johnson

Excellent, thank you Senator, and thank you Fred Nathan for your group's (ThinkNM) hard work on these kind of issues to make NM better.

Emily Hartigan

Taxing Social Security hits the little guys most. The top 5% don't need SS to begin with, but ordinary folks often depend on it. Taxing it raises little revenue, but hurts the most vulnerable.

Francisco Carbajal

It is about time for the New Mexico State Legislature and Governor Lujan-Grisham to get off their tuff's and make this happen for ALL New Mexican's. Why in the world should I be paying state taxes on my social security account that I have worked for so long over 32 years or so? If we point out what is a public policy for New Mexico is taxing our social security benefits to keep the state general operating funds in check. Wrong Answer! The social security benefits ownership is not for the State of New Mexico to keep in the piggy bank coffers, period! So, why hasn't Governor Lujan-Grisham and the State Legislature made the social security issue a priority piece of legislation for the incoming 2022 session? What are they allowed to take advantage of the senior citizens and retirees of New Mexico? Shame on them!

Susan Waller

Finally! A great idea!

Francisco Carbajal

A bad public policy that we have right now is taxing our social security benefits to keep the state general operating funds alive is wrong altogether!

Richard Reinders

Remember it is an election year this has been brought up in the past but didn't have the pressure of re election behind it.

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