At least five bills have been introduced during this legislative session to repeal New Mexico’s counterproductive tax on Social Security benefits. We urge the Legislature to repeal this tax, as doing so would provide a big boost to New Mexico’s economy. It might be off the table this session, but eliminating this tax would help the state long term.

Research by Bob Grassberger, professor emeritus at the University of New Mexico, has found that retirees benefit the economy by starting businesses, continuing to work part-time and engaging in recreational activities. He estimates that every household of retirees in New Mexico generates half a job.

Every dollar of Social Security benefits generates about $1.71 in economic output as the money is spent on goods and services like food, clothes, transportation and health care. The $4.86 billion in Social Security benefits that go to New Mexicans every year generates about $7.66 billion in economic output, helping support over 52,000 jobs, particularly in the health care, retail, food and beverage, and real estate sectors.

Repealing the tax on Social Security benefits would put $73 million back in the pockets of seniors across the state. As seniors spend these dollars, they would generate approximately $125 million in direct economic output across the state. That economic activity would in turn generate gross receipts tax revenue, reducing the cost of the repeal to the state.

Along with increasing the incomes of the seniors who are already here, ending the tax on social Security would benefit New Mexico’s economy by attracting more middle-income and higher-income retirees.

Unfortunately, according to a 2018 analysis by the Brookings Metropolitan Program, New Mexico stands out as the only Southwestern state that is not gaining seniors. Southern California, Arizona, Texas — not to mention Florida, Georgia and Alabama — are seeing an influx of seniors from Northern states. None of these states taxes Social Security benefits.

According to a 2016 analysis by U.S. News and World Report, New Mexico ranks favorably on many of the features that seniors look for when they are considering where to retire: temperate climate and weather (hence the movement from Northern to Southern states), affordable cost of living, access to health care, cultural amenities, educational opportunities and recreation. The one area where New Mexico falls very short is its tax friendliness.

The fact that New Mexico heavily taxes Social Security benefits is a major reason why publication after publication ranks our state as one of the worst to retire in. Here are just a handful of recent examples:

  • In 2019, Moneywise ranked New Mexico 47th of the 50 states for retirement, writing: “[The state’s] rugged beauty will tug at your heartstrings to stay a while longer — but it might be best to just visit”
  • Kiplinger’s has consistently ranked New Mexico in the five worst states to retire, writing in 2018: “The land of Enchantment is not a magical place for well-off retirees.”
  • Yahoo Finance ranked New Mexico among the worst states to retire: “Though retirement represents the end of one’s career, it doesn’t have to be the end of financial security, nor should it mean a lower quality of life.”
  • The Balance ranked New Mexico as one of the 10 worst states to retire: “Most of the states on our list have been in the northern portions of the country but there are some steer-clear states in the southern portion as well. Leading that charge is New Mexico.”
  • Bankrate and WalletHub also place New Mexico in the bottom 10 states to retire.

By making the state so unappealing to retirees, New Mexico’s tax on Social Security is acting as drag on a potential source of powerful economic growth.

We hope the Legislature and governor will follow Think New Mexico’s recommendation and repeal this double tax and unlock New Mexico’s potential as a destination for retirees and the jobs they create.

Dale R. Dekker, AIA, AICP, is the principal and architect at Dekker, Perich and Sabatini. John Garcia is the executive vice president of the Home Builders Association of Central New Mexico.

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(1) comment

Gary Armstrong

Sadly the legislature took the easy route by tabling both bills to end or modify the tax on Social Security benefits. As a retired New Mexican who depends on SS benefits I now find that I cannot recommend to friends that they consider NM as a retirement location.

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