In response to Senate Joint Memorial 27 of the 48th Legislature State of New Mexico Second Session 2008, the Office of Policy Analysis of the Arrowhead Center in cooperation with Department of Economics and International Business at New Mexico State University conducted an economic impact analysis of the effect on the State of exempting retired military service pay from New Mexico Personal Income Tax. Many states provide some type of exemption for various types of military pay and the argument is that more military retirees will come to New Mexico if the exemption is enacted. While tax implications are a likely factor in deciding where to retire, they are not likely to comprise the only important decision parameter. Other factors include close proximity to military bases, climate and amenities. New Mexico is already well suited for military retirees. The exemption of retirement pay from the personal income tax would provide one more reason for retired military service personnel (RMSP) to retire to the state.