Proposal would repeal state tax on Social Security benefits for New Mexico seniors
When will you start drawing from your social security? It’s an important question, and waiting just a few years can make a big difference. Buzz60
SANTA FE - New Mexico's population is gradually aging, and the state already ranks among the highest in the nation when it comes to percentage of senior citizens living in poverty.
To address what it describes as a looming retirement security crisis, a Santa Fe-based think tank is proposing several changes in state law — including repealing a tax on Social Security benefits, ensuring private sector workers have access to retirement savings accounts and taking steps to stabilize the state's pension funds.
Think New Mexico, the group proposing the changes, says in a new report that the state's growing retirement security crisis affects not only elderly residents, but other taxpayers who help pay for Medicaid, housing assistance and other government aid programs.
"Enhancing retirement security will lift all New Mexicans, as seniors with sufficient retirement savings generate economic development that creates jobs for other New Mexicans," said Fred Nathan, the group's executive director.
The proposals could be considered during the 30-day legislative session, starting in January, though Gov. Michelle Lujan Grisham would have to add them to the agenda. A spokeswoman for the Democratic governor said Friday the Governor's Office is weighing a number of issues "jostling for space" in the upcoming session, including task force recommendations and requests from legislators and advocacy groups.
One action proposed in the Think New Mexico report is repealing — fully or in part — the state's income tax on Social Security benefits.
New Mexico is one of just 13 states that levy an income tax on Social Security payments to at least some beneficiaries, according to the American Association of Retired Persons.
The tax was enacted in 1990 and doing away with it would keep nearly $700 a year in the pockets of the average state senior, the Think New Mexico report says.
However, such a policy decision would also cost the state an estimated $73 million annually in foregone tax revenue, a figure that could be absorbed — at least for now — given the state's projected $2.3 billion budget surplus for the current fiscal year.
Senate President Pro Tem Mary Kay Papen, D-Las Cruces, said she had not yet read the Think New Mexico report but expressed general support for policies that could make New Mexico more attractive for senior citizens.
"We need to be attracting residents so we can keep our businesses open," Papen told the Albuquerque Journal.
However, she also said state policies aimed at helping elderly citizens should be closely scrutinized to make sure they don't harm other state residents in the process.
"I want senior citizens to be treated fairly, just as I want all citizens to be treated fairly," Papen said.
Currently, there are an estimated 120,000 New Mexicans age 65 and older, and roughly 12% of those individuals are below the federal poverty line, according to a 2017 U.S. Census Bureau survey.
And while New Mexico's overall population has posted slow growth over the past decade, the number of senior citizens living in the state has steadily increased.
New Mexicans age 65 or older were estimated to make up 17.5% of the state's population as of last year — up from 13.2% in 2010 and 11.7% in 2000, according to the U.S. Census Bureau.
Meanwhile, other policy steps proposed in the Think New Mexico report include automatically offering retirement accounts to private-sector employees who do not already have retirement plans available through their work.
Oregon, California and Illinois are among the states that have already enacted such a policy, and a New Mexico task force created in 2017 to study retirement security issues recommended the approval of a similar law here.
In addition, the think tank is proposing several steps to shore up New Mexico's two large retirements systems — the Public Employees Retirement Association and the Educational Retirement Board — that had a combined unfunded liability of $13.5 billion as of last year.
Those proposals include consolidating investment duties between the two pension funds, increasing qualification requirements to serve on the PERA and ERB boards, and a one-time cash infusion — or loan — of $700 million to the PERA to get the retirement system on to more stable financial footing.
A task force created by Lujan Grisham after this year's legislative session has come out with its own proposals, which include requiring public employees and the agencies they work for to pay more into the PERA fund and reduce the cost-of-living adjustments available to retirees over the next three years.
Those ideas, which are also subject to legislative approval, could be compatible with the changes proposed by Think New Mexico.
The 30-day legislative session starts Jan. 21.
At a glance
While New Mexico's overall population has grown slowly over the past decade, the number of senior citizens living in the state has steadily gone up. A new report identifies possible steps to address what it describes as a brewing retirement security crisis.
- Average N.M. Social Security benefits: $13,900 per year
- State population age 65 or older as of 2018: 17.5%
- New Mexico seniors living in poverty: 12.2%
Source: U.S. Census Bureau and Think New Mexico