Exempting all social security income from tax does not help seniors who need it most
Board member, NM Voices for Children, former U.S. Senator
Social security has done a remarkable job of keeping the vast majority of seniors out of poverty. The elderly still living in poverty should receive more help from the federal and state governments. But exempting all social security income from taxation will not provide a penny of help to our low-income seniors. What this will mean is that the state will have less money to support the programs and services that matter most to our society.
Most seniors who earn low incomes – and even many who earn middle incomes – are already exempt from paying income tax on their social benefits. The vast majority of the benefit of this proposed tax cut will go to seniors earning $ 50,000 and up, more than the state’s median income. More than half of the benefit would go to those in the top 20% of the income ladder. And even for those at the very top, the part of their social security benefit from which they have already paid taxes while working is exempt from that tax.
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And in addition to not helping those in our communities who need it most, this proposed tax cut would be costly – and cost at least $ 120 million each year. It’s a recurring revenue loss in New Mexico each year – $ 120 million that could be used for classrooms, parks, meal programs, hospitals and basic infrastructure. And the $ 120 million is two and a half times the budget of the Department of Aging and Long-Term Services, which provides several services to seniors. When we underfinance these essential things, we are not only harming the families and communities that depend on them, but we are also harming our economy. We lose jobs, and with them we lose the income that they pump into our businesses. We are also losing young people who have to go elsewhere to find jobs that pay them enough to support themselves and their families.
I know very well that it is tempting to introduce tax breaks when the treasury is full. But as we all too well know, while our families’ need for good schools, safe roads and high-quality health care remains constant, the money we receive can vary greatly from year to year because we are so dependent on a volatile source as oil and gas. Tax breaks last forever, but the economic situation the state is in right now could change in a few years, when federal subsidies fall and the oil and gas industry suffers a dip again. The programs we support – education, health care, public safety and our aging and long-term services department – need robust and consistent funding year after year if they are to offer the same level and quality of services to our families, neighborhoods, and other members of society.
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If we want to help our low-income seniors – or any of our low-income residents for that matter – the best way to do that is to increase the tax deductions and rebates specifically targeted at them and to ensure that we have sufficient income to invest in the programs and services that matter most to them. When we put our efforts in that direction, we are not only helping those among us who need help the most, but we are also building a better future for the entire state.