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Committee recommends removing $30,000 cap on military retiree tax exclusion; fiscal impact estimated about $6 million annually

House Labor, Veterans and Military Affairs Committee · February 3, 2026

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Summary

House Bill 221, which would remove the $30,000 cap on the state's military retiree personal income tax exclusion, received a due-pass recommendation. Sponsors and the Department of Veterans Services said modeling shows roughly 130,000'148,000 veterans in-state and the fiscal-impact report estimates roughly a $6 million annual general-fund cost.

Representative Ellen Martinez presented House Bill 221, which would remove the $30,000 cap on the New Mexico personal income tax exclusion for military retirement pay. "Taking this off is not gonna be a huge cost to the state. It's around $6,000,000 a year," Martinez said, citing figures used in the fiscal-impact report (FIR).

Eric James, deputy cabinet secretary for the Department of Veterans Services, told the committee the department supports the bill and cited VA-based modeling that the state counts roughly 130,000 to 148,000 veterans, noting that only a subset will have 20 years of service and qualify as retirees. James said the modeling the department uses follows VA census-based projections and that the veteran population is projected to decline slightly over time without additional recruitment events.

Frank Smith, chair of the New Mexico Veterans and Military Families Caucus, also voiced support. Committee members asked detailed questions about how many veterans would be affected, how the $6 million estimate was derived and how impacts project beyond fiscal year 2030. Deputy Secretary James and the sponsor said the FIR (prepared by Tax and Revenue) provided the estimate and that the modeling is updated annually by VA data.

A motion for a due-pass recommendation was made and seconded. The chair asked for any opposition, heard none, and the committee granted a due pass by voice vote; the transcript records no roll-call tally.

The bill will advance from committee with the recommendation to pass. The committee indicated it expects further revenue analysis from tax-and-revenue staff in subsequent hearings.