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| Jim Harbison |
By Jim Harbison - Every year approximately 60,000 highly skilled men and women retire from the military. They are in their early 40's, proficient in management, medical, educational, engineering, information technology, security, scientific or technical career fields. They are seeking a place to settle down, buy a home, and many want to start their own small businesses. With their combination of retirement pay, savings, and health care coverage they will not be a burden on New Mexico welfare or Medicaid programs.
Where are these military retirees choosing to settle? Surveys show that many prefer an area where they have previously served, are close to a military base, has a good climate and a favorable quality of life. New Mexico, scores high on these criteria. Ability to find a decent job or a state that encourages small business development is also a key consideration. Close to the top of the list of all considerations is the key issue of retirement pay taxation. Why do so many states provide tax incentives to military retirees? The financial driver is recognition that these retirees provide an economic windfall to the state. Currently 62% of military retirees live in 13 states. Eight of these states offer 100% income tax exemptions, four others offer significant exemptions.
In the past nine years NM has averaged only 115 new military retirees a year out of the approximate 60,000 retiring each year. We are nowhere near getting our possible piece of the “pie”. Our neighboring states, AZ, TX, UT & CO which all offer full, or significant, tax exemptions to these retirees, have drawn thousands more than NM.
As of 2009 New Mexico had 22,899 military retirees who received $1,642,940,000 in income. Their average household income is $86,161. Add a very conservative 2.0 economic multiplier to this sum and the $1.6B expands to well over $3 Billion. Economists estimate that every million dollars of new federal funds coming in to the state creates 10-12 new jobs. Bringing 30 new military retirees to the state creates 12 new jobs in addition to the numerous other impacts of the federal funds multiplier. If the state’s military retiree population creates such a significant contribution to the state’s economy, why isn’t the State aggressively pursuing incentives to draw more military retirees? 
Additionally, the new “GI Bill” brings increasing revenues to colleges and universities. The “Post 9/11 GI Bill offers qualified veterans up to 36 months of paid tuition, housing allowances and book stipends. The value of this program is estimated at 50-60 thousand dollars per retiree and it extends for a period of 15 years after they leave military service. It can be used by a dependent if not used by the veteran during that period. This GI Bill and in-state tuition rates are strong attractions for military retirees nationwide to come to New Mexico schools to get a undergraduate or graduate degrees. They will appreciate the benefit of in-state tuition rates but they will balk at the taxation of their retirement pay.The comprehensive study by Arrowhead Center at NM State University determined that “The Economic Impact of Exempting Retired Military Service Payments from New Mexico Personal Income Tax” would in fact be good policy for the state.
Putting New Mexico on a level playing field with competing states vis-a-vis tax exemption for military retiree pensions could prove a boon to the state. New Mexico offers proximity to military bases, VA hospitals and many other things attractive to the military retiree. It’s time to pass legislation to change the tax code and ensure we draw many more from across the country.
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