In the wake of Governor Michelle Lujan Grishams State of the State AddressRep. Jim Townsend, Republican House minority leader, said during the speech that he believed the governor “Almost became a Republican.” He’s not mistaken.
After three full years and legislative sessions (not to mention several special sessions and the constant invocation of her “distress” powers) of ruling as a hard left-wing “progressive”, the governor appears to be going to the center ahead of his re-election bid. this fall. This can be both good politics and good politics.
Specifically in her State of the State address, Lujan Grisham announced that she wants New Mexico to stop taxing social security. New Mexico is one of just 13 states in the nation doing this, and in recent years, efforts have been made by two parties to remove or significantly reduce taxes.
Her support for repeal is welcome, but many “progressives” in her own party seem skeptical. At the time of writing, the House Labor Committee’s abolition of social security tax failed. Only one Democrat and three Republicans supported the idea. So the abolition of social security tax is by no means a “finished deal”.
This is true even though the state has plenty of money, as it turns out the governor’s ambitious budget which contains a consumption increase of 13.5% compared to last year. The $ 80 million or so in “lost” revenue from ending the tax is a drop in the bucket compared to the flow of new revenue. This is a flood that seems to continue with high oil prices and record production in the Perm basin. So New Mexico has plenty of money to lower taxes. In fact, the governor and the legislature should look for ways to use this stream of new money to both cut and reform taxes in ways that help diversify the economy.
Although the decision to remove the social security tax is welcome, it is not the first time the governor has had a large surplus (or budget increase) available. In her first year in office (2019), the budget grew by 11 percent, while several taxes were increased, including taxes on car sales and hospitals. Bipartisan Social Security tax elimination bills have been repeatedly proposed since then. It certainly seems that the governor’s decision has a large dose of election year policy. There’s nothing wrong with that, but it’s worth noting.
To her credit, the governor seems to be inclined to remove the social security tax without raising other taxes, as a bill introduced this session would do. With the kind of money available, it is difficult to justify raising taxes to compensate for the small loss of revenue. What’s worse, a “revenue-neutral” bill, introduced by Senator Bill Tallman, would increase regressive tobacco taxes to compensate for “lost” revenue.
Eliminating Social Security taxation should be a direct tax cut in favor of New Mexico seniors and those who might consider moving to New Mexico but who see our state as “unwelcome” to retirees because of our tax policy.
This Legislative Assembly is truly an opportunity for the Legislative Assembly to “be brave” in implementing transformative political changes. Reforming the ruined gross income tax to eliminate taxation of services remains the best way to do it. However, eliminating an unnecessary tax that makes New Mexico unattractive as a retirement destination is a valuable goal, and we hope for the best and stand ready to support advocates for the abolition of this session by the Social Security tax.
Paul Gessing is president of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, impartial, tax-free research and education organization dedicated to promoting prosperity for New Mexico based on the principles of limited government, economic freedom, and individual responsibility.
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