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Committee tables two bills that would exempt New Mexicans from tax on Social Security

Jens Gould
The Santa Fe New Mexican
An aide speaks on the phone at the New Mexico Roundhouse while state lawmakers debate a state budget and early childhood education on Wednesday, Feb. 5, 2020, in Santa Fe, N.M.

The House Taxation and Revenue Committee tabled two bills Friday that proposed to eliminate or reduce the state's tax on Social Security income.

Key legislators had previously voiced support for House Bills 29 and 77, and the majority of public attendees who spoke favored them at Friday's committee hearing. Yet Democratic and Republican legislators alike said they were worried about altering the tax without having a plan to replace lost revenue.

"You can't have it both ways. Somewhere you have to pay the piper," said Rep. Jim Trujillo, a Santa Fe Democrat and co-chairman of the committee. "Let's find a way to pay for it so we don't create a hole in the general fund."

HB 29, sponsored by five Republicans including Reps. Cathrynn Brown and Gail Armstrong, would have repealed New Mexico's tax on Social Security income.

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On the other hand, HB 77, co-sponsored by Democratic Rep. Daymon Ely of Corrales, would have allowed people to exempt up to $24,000 in Social Security income.

During the hearing, Brown and Armstrong told stories of their constituents who had asked them not to tax their Social Security income. Brown added that their bill would provide a form of economic development by attracting more retirees to New Mexico.

Fred Nathan, executive director of Santa Fe-based Think New Mexico, advocated for the legislation alongside the sponsors, saying it would help retirees who have little or no money saved for retirement. He also said the state's current policy was a form of double taxation.

"So, why is the tax wrong? New Mexico is one of only 13 states to tax Social Security benefits," said Nathan, whose think tank recently released a report on what it called "a looming retirement security crisis" in the state. "Of those states, we have the second harshest tax."

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But when it was time for committee members to speak, they expressed numerous concerns about the legislation.

Rep. Jason Harper, R-Rio Rancho, contested the notion that the current policy represented a double tax and also argued that repealing or reducing the tax wouldn't help the poor.

Soon after, committee co-chairman Rep. Javier Martinez, D-Albuquerque, said the savings that seniors would receive from the proposals were not worth the hole in revenue that they would create. He encouraged the sponsors to study the idea further.

"We have to have a backup plan for replacing the revenue," he said.

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House Speaker Brian Egolf said last week that the bills had "a lot of traction" and that he supported them "100 percent."

He also noted, however, that the proposed exemption could cost the state $75 million to $80 million and that it might be difficult to find replacement revenue this legislative session.