Social Security: One state works to repeal taxes

One bill heading into the legislative session in New Mexico would eliminate state income tax for residents collecting Social Security benefits.

social security cards with cash and a chart representing social security tax

Many seniors in some states collect Social Security, only to end up paying income tax on them after already doing that during their working years.

If the bill passed, it would save money for seniors, but cost those who use tobacco more.


Related: Understanding Social Security benefits before retiring

The plan to end tax on retired seniors’ income in New Mexico

If the bill is passed, seniors will no longer need to pay taxes on Social Security benefits.

To make up for the loss in revenue, Senator Bill Tallman suggests putting higher taxes on cigarettes and tobacco products.

Tallman said that ending the tax is the right thing to do for seniors.

New Mexico is one of just 13 states that tax their beneficiaries.

The average recipient in New Mexico collects about $14,000 in benefits per year, but after taxes it’s much less.

The reform was first recommended in a think tank in 2019.


Related: COLA: SS recipients need more money

History of taxation on Social Security benefits in NM

In 1990 lawmakers repealed the exemption for Social Security benefits being taxed.

Tallman described it as one line on the second-to-last page of a “long and complex bill.”

He described residents paying taxes on their benefits as a double taxation because they paid the same taxes their entire lives.