The battle over Social Security income taxes is playing out in the Land of Enchantment, as lawmakers in New Mexico consider doing away with the state’s taxes on Social Security benefits.
In New Mexico, personal income taxes apply to Social Security benefits on all but lower-income residents, U.S. News & World Report noted. Individuals earning up to $25,000 and joint tax filers earning up to $32,000 get a full exemption.
But legislators in the state have introduced competing bills to end the tax on Social Security benefits. Gov. Lujan Grisham last week threw her weight behind a bill from state Sen. Michael Padilla to enact a full and immediate tax exemption for Social Security income.
A separate bill from Sens. Bill Tallman and Martin Hickey would end taxes on Social Security income for everyone except higher-income households. A third bill, backed by gubernatorial candidate Rep. Rebecca Dow, would phase out state taxes on Social Security income gradually between 2022 and 2026.
New Mexico is one of 13 states that have some kind of tax on Social Security benefits, KRQE reported, citing comments from Dow. Critics say the tax hurts the state’s ability to attract more retirees, which is one reason there is bipartisan support to get rid of it.
Ending the tax would cost the state anywhere from $70 million to $90 million in yearly revenue, according to at least one analysis. But supporters of the bills say that shortfall would be offset by New Mexico’s general fund surplus of roughly $1.6 billion.
“We have what’s called a ‘silver tsunami’ coming, where the majority of living citizens in the U.S. will be retirees, and so they’ll be senior citizens by definition and we want to attract them to retire in New Mexico,” Dow told KRQE.
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This article originally appeared on GOBankingRates.com: Social Security Benefit Taxes: Could New Mexico Phase Them Out Thanks to Competing Bills?