Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports if they are used for other purposes.

 

Current FIRs (in HTML & Adobe PDF formats) are available on the NM Legislative Website (legis.state.nm.us).  Adobe PDF versions include all attachments, whereas HTML versions may not.  Previously issued FIRs and attachments may also be obtained from the LFC in Suite 101 of the State Capitol Building North.

 

 

F I S C A L    I M P A C T    R E P O R T

 

 

 

SPONSOR

Romero

DATE TYPED

1/30/2004

HB

 

 

SHORT TITLE

Military Retirement Pay Income Tax Deduction

SB

159

 

 

ANALYST

Taylor

 

 

REVENUE

 

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY04

FY05

(500.0)

(2,000.0)

(2,000.0)

Recurring

General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

 

SOURCES OF INFORMATION

LFC Files

 

Responses Received From

Taxation and Revenue Department

 

SUMMARY

 

Senate Bill 159 exempts U.S. military retirement pay of up to $3 thousand from New Mexico income taxes.  The exemption is also provided to surviving spouses.

 

The bill is applicable beginning January 1, 2004.

 

FISCAL IMPLICATIONS

 

TRD estimates this would decrease General Fund revenues by about $2 million on a full year basis.  The estimate assumes 21 thousand military retirees with an average military retirement of $17 thousand.  It also assumes the average effective income tax rate is 3.2 percent.  Multiplying 21 thousand benefiting taxpayers by $3 thousand by 3.2 percent yields an impact of just over $2 million.  (TRD’s analysis included tables reporting the number of military retirees and average retirement pay by state.  These are attached at the end of the FIR.)

 

The FY04 impact reflects payments for the first half of the year, which is 25 percent of the full year impact.

 

 

 

ADMINISTRATIVE IMPLICATIONS

 

TRD reports modest administrative impacts that can be handled with existing resources.

 

OTHER SUBSTANTIVE ISSUES

 

TRD submitted the following issues:

 

  1. Individuals with incomes and other circumstances similar to people receiving the proposed exemption  are likely to view it as unfair, especially when they compete with the retirees for jobs, and when the retirees are individuals with relatively high incomes.  According to information the “military com” website (http://usmilitary.about.com/) military retirement pay can be over $9,000 monthly for high-ranking officers retiring in 2004.

 

  1. By limiting the exemption to New Mexico residents, it is possible that the statute could be seen as discriminatory to non-resident veterans who are required to file New Mexico return, e.g., veterans with rental income in the state.  Currently, all non-residents are entitled to allocate their retirement income to their state of residence; see, 4 USCA Section 114.   Exempting a portion of the resident's retirement income, however may provide a slight tax advantage over a non-resident who is required to allocate, because the exemption may result in a lower effective tax rate under New Mexico's graduated tax system.

 

 

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Illustration: Number of Retirees and Total Military Pay by State

 

Retirees By State*

 

 

 

 

 

State

Army

Navy

Marine Corps

Air Force

Total DoD

Alabama

         25,033

           6,691

              1,623

         15,371

            48,718

Alaska

           2,761

              652

                 133

           4,302

              7,848

Arizona

         13,828

           7,888

              3,008

         23,480

            48,204

Arkansas

           8,108

           4,644

                 969

         10,722

            24,443

California

         34,713

         83,245

            18,396

         61,339

          197,693

Colorado

         16,586

           5,299

              1,299

         21,640

            44,824

Connecticut

           3,006

           4,986

                 584

           2,166

            10,742

Delaware

           1,592

              897

                 207

           4,052

              6,748

Dist. of Columbia

           1,756

              627

                 139

           1,033

              3,555

Florida

         44,392

         58,862

              7,851

         67,465

          178,570

Georgia

         40,385

         11,109

              3,421

         21,094

            76,009

Guam, MI

              614

              783

                   76

              482

              1,955

Hawaii

           5,558

           3,965

                 979

           3,654

            14,156

Idaho

           2,554

           2,511

                 480

           4,802

            10,347

Illinois

         10,283

           8,012

              1,848

         12,079

            32,222

Indiana

           8,947

           4,421

              1,377

           6,396

            21,141

Iowa

           3,736

           2,528

                 584

           3,026

              9,874

Kansas

           9,014

           2,943

                 788

           6,446

            19,191

Kentucky

         14,033

           3,442

                 944

           4,959

            23,378

Louisiana

           9,531

           4,921

              1,337

         11,159

            26,948

Maine

           2,898

           4,004

                 511

           3,681

            11,094

Maryland

         16,835

         12,810

              2,063

         12,322

            44,030

Massachusetts

           7,406

           5,798

              1,314

           6,412

            20,930

Michigan

           9,336

           6,266

              1,562

           8,077

            25,241

Minnesota

           5,515

           3,907

                 832

           4,854

            15,108

Mississippi

           7,344

           5,708

                 921

         10,227

            24,200

Missouri

         13,078

           6,850

              2,078

         11,222

            33,228

Montana

           1,911

           1,516

                 360

           3,223

              7,010

Nebraska

           2,336

           1,798

                 340

           7,886

            12,360

Nevada

           4,808

           5,669

              1,449

         12,816

            24,742

New Hampshire

           2,828

           2,087

                 436

           4,037

              9,388

New Jersey

         10,028

           5,386

              1,226

           5,423

            22,063

New Mexico

           5,516

           2,928

                 723

         11,144

            20,311

New York

         14,443

           8,307

              2,319

         10,536

            35,605

North Carolina

         30,979

         11,599

            10,214

         17,671

            70,463

North Dakota

              960

              436

                   66

           2,239

              3,701

Ohio

         12,226

           8,036

              2,348

         17,921

            40,531

Oklahoma

         13,229

           4,494

              1,134

         14,149

            33,006

Oregon

           5,883

           6,759

              1,358

           6,689

            20,689

Pennsylvania

         18,018

         11,686

              3,251

         12,148

            45,103

Puerto Rico

           7,539

              415

                 131

              942

              9,027

Rhode Island

           1,406

           3,177

                 246

              932

              5,761

South Carolina

         17,707

         12,548

              2,858

         16,248

            49,361

South Dakota

           1,513

              792

                 132

           2,978

              5,415

Tennessee

         18,744

           9,979

              2,374

         12,254

            43,351

Texas

         65,305

         23,760

              6,258

         77,830

          173,153

Utah

           3,321

           1,805

                 431

           5,875

            11,432

Vermont

           1,424

              679

                 142

           1,027

              3,272

Virginia

         39,097

         47,543

              7,841

         25,641

          120,122

Virgin Islands

              183

                49

                     6

                44

                 282

Washington

         22,706

         21,840

              2,252

         20,481

            67,279

West Virginia

           3,889

           2,208

                 684

           2,889

              9,670

Wisconsin

           6,580

           4,025

                 963

           4,906

            16,474

Wyoming

              985

              715

                 135

           2,309

              4,144

Other

         10,486

           5,553

                 883

           8,707

            25,629

Total

       642,892

       469,558

          105,884

       651,407

       1,869,741

*As of September 30, 1999

 

 

 

 


 

Retired Military Monthly Pay** By State (In Thousands)

 

 

State

          Army

          Navy

 Marine Corps

     Air Force

     Total DoD

Alabama

         35,542

           8,086

              2,075

         22,048

            64,752

Alaska

           3,088

              765

                 122

           5,273

              9,248

Arizona

         19,140

         10,203

              4,226

         35,871

            69,441

Arkansas

           9,159

           5,575

              1,147

         14,220

            30,101

California

         43,382

       113,119

            27,044

         93,177

          276,722

Colorado

         23,403

           7,167

              1,715

         37,311

            69,596

Connecticut

           3,136

           6,609

                 517

           2,680

            12,941

Delaware

           1,839

           1,037

                 232

           5,403

              8,513

Dist. of Columbia

           2,100

              899

                 138

           1,220

              4,357

Florida

         44,392

         58,862

              7,851

         67,465

          263,126

Georgia

         40,385

         11,109

              3,421

         21,094

          101,102

Guam, MI

              614

              783

                   76

              482

              2,329

Hawaii

           5,558

           3,965

                 979

           3,654

            20,332

Idaho

           2,554

           2,511

                 480

           4,802

            13,541

Illinois

         10,283

           8,012

              1,848

         12,079

            39,076

Indiana

           8,947

           4,421

              1,377

           6,396

            23,671

Iowa

           3,736

           2,528

                 584

           3,026

            10,393

Kansas

           9,014

           2,943

                 788

           6,446

            25,013

Kentucky

         14,033

           3,442

                 944

           4,959

            27,745

Louisiana

           9,531

           4,921

              1,337

         11,159

            33,481

Maine

           2,898

           4,004

                 511

           3,681

            13,360

Maryland

         16,835

         12,810

              2,063

         12,322

            64,021

Massachusetts

           7,406

           5,798

              1,314

           6,412

            22,815

Michigan

           9,336

           6,266

              1,562

           8,077

            26,787

Minnesota

           5,515

           3,907

                 832

           4,854

            16,238

Mississippi

           7,344

           5,708

                 921

         10,227

            29,469

Missouri

         13,078

           6,850

              2,078

         11,222

            40,180

Montana

           1,911

           1,516

                 360

           3,223

              8,759

Nebraska

           2,336

           1,798

                 340

           7,886

            16,926

Nevada

           4,808

           5,669

              1,449

         12,816

            35,100

New Hampshire

           2,828

           2,087

                 436

           4,037

            12,786

New Jersey

         10,028

           5,386

              1,226

           5,423

            24,918

New Mexico

           5,516

           2,928

                 723

         11,144

            29,861

New York

         14,443

           8,307

              2,319

         10,536

            35,069

North Carolina

         30,979

         11,599

            10,214

         17,671

            94,212

North Dakota

              960

              436

                   66

           2,239

              4,127

Ohio

         12,226

           8,036

              2,348

         17,921

            47,831

Oklahoma

         13,229

           4,494

              1,134

         14,149

            40,263

Oregon

           5,883

           6,759

              1,358

           6,689

            25,538

Pennsylvania

         18,018

         11,686

              3,251

         12,148

            52,869

Puerto Rico

           7,539

              415

                 131

              942

              6,544

Rhode Island

           1,406

           3,177

                 246

              932

              7,477

South Carolina

         17,707

         12,548

              2,858

         16,248

            66,821

South Dakota

           1,513

              792

                 132

           2,978

              6,571

Tennessee

         18,744

           9,979

              2,374

         12,254

            54,733

Texas

         65,305

         23,760

              6,258

         77,830

          249,520

Utah

           3,321

           1,805

                 431

           5,875

            15,588

Vermont

           1,424

              679

                 142

           1,027

              3,784

Virginia

         39,097

         47,543

              7,841

         25,641

          215,527

Virgin Islands

              183

                49

                     6

                44

                 372

Washington

         22,706

         21,840

              2,252

         20,481

            92,777

West Virginia

           3,889

           2,208

                 684

           2,889

            10,379

Wisconsin

           6,580

           4,025

                 963

           4,906

            17,141

Wyoming

              985

              715

                 135

           2,309

              5,283

Other

         10,486

           5,553

                 883

           8,707

            36,194

Total

       642,892

       469,558

          105,884

       651,407

       2,535,320

Source: http://www.military.com/Resources/ResourceFileView?file=retirees_stats.htm#Monthly

 

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