According to a recent study by United Van Lines, 43 percent of respondents cited retirement as their primary reason for relocating to New Mexico.
For the first time ever, New Mexico moved to No. 1 in the survey for retirement popularity, supplanting Florida and Arizona, which followed at 39 percent and 37 percent, respectively. The survey marked the 42nd year that United Van Lines has tracked national migration patterns and peoples’ motivations for moving.
It’s interesting data because even though many retirees are choosing to move here, New Mexico is still experiencing a negative net migration — the number of people that move into and out of a state — and its overall population has remained largely flat since 2010.
Obviously, many retirees are recognizing the great things New Mexico has to offer: unmatched weather, amazing scenery and abundant outdoor activities, a diverse and vibrant culture, etc. Are there opportunities to capitalize on this trend by offering additional incentives to attract even more of these typically affluent retirees to our state?
Though there are many reasons people choose to relocate for retirement, tax incentives are an important part of the equation, and some states are friendlier than others when it comes to taxation. Seven states have zero state income tax, including Texas and Nevada, and 13 states give retirees a break on their Social Security and pension income, including New Mexico.
This state offers taxpayers 65 years of age and older a deduction from taxable income of up to $8,000 each. The deduction is $2,500 if under the age of 65.
Would eliminating state income tax on Social Security benefits affect New Mexico state tax revenues? Sure, but state government is projecting a $2.3 billion budget surplus for the current fiscal year, largely due to dramatic increases in oil and gas tax revenue.
While the state may not always be able to rely on such a huge surplus, recent legislation increasing taxes on things like vehicles, cigarettes and online sales should more than offset the revenue shortfall.
According to the state’s Legislative Finance Committee, an elimination of the Social Security tax would decrease tax revenues by about $73 million, and it’s estimated that collecting gross receipts tax from out-of-state internet sellers alone will raise about $43 million for the state general fund in the coming fiscal year.
Keep in mind, every dollar that a retiree saves in taxes is a dollar that can be freed up and spent on other goods and services, thereby increasing gross receipts tax revenues. These additional discretionary dollars flowing through local economies have also been shown to contribute to local job growth, particularly in the service sector.
The number of New Mexicans age 65 or older, estimated at 120,000, has grown steadily since 2000 from 11.7 percent to 17.5 percent. Repealing or further reducing state taxes on Social Security benefits will allow New Mexico to continue to attract and retain these affluent seniors and add yet another tool to the state’s current economic development plan.
(Brad Crowson is the regional manager for WESST, a nonprofit small-business development and training organization dedicated to supporting entrepreneurs in Rio Rancho and throughout New Mexico. For more information, visit wesst.org or call 892-1238.)