We will add brief descriptions for each tax bill we support as they are introduced and as Fiscal Impact Reports (FIRs) and other supporting documentation are available. The two bills summarized below, HB 119 and HB 120, are the first to receive a hearing. Please use the info below to frame your comments.
Seeking Tax Justice and Equity, Revenue Diversity and Stability
In New Mexico, as the chart at left reveals, our lowest income taxpayers pay an average state and local tax rate that’s well over double what the top 1 percent of households pay.
The average effective state and local tax rate is 10.6% for the lowest-income individuals and families (those earning under $17,000/yr).
Those earning between $17,000 and $30,000 pay 10.2% of their income in taxes. While the top 1% of NM taxpayers (earning over $330,000) only pay about 4.8% of their income in taxes. This is incredibly regressive.
New Mexico’s revenue system – which raises the money we need to fund our hospitals, fix our roads, and pay our teachers, first responders, and others – is entirely too dependent on revenue from oil and gas. These boom-and-bust industries make New Mexico’s annual budget a roller coaster ride. The issue is so concerning, a group of financial experts recently warned the Legislature about it (which NM Voices for Children wrote about here).
Personal income taxes can help stabilize revenues, but cuts in personal tax rates for those at the top that were made two decades ago have made our revenue system more volatile – not to mention less equitable and less fair. Two bills have been filed that would improve this system (HB 119 and HB 120).
HB 119 Income Tax Bracket Changes
HB 119, the restructuring of personal income tax rates, would lead to a tax cut for most working New Mexicans, while raising new revenue from the highest income-earners.
HB 119 would achieve this by making the Personal Income Tax (PIT) system much more progressive by creating new brackets, with higher rates for high income tax payers. For example:
- In the current PIT system a taxpayer earning $200,000 would pay just 5.9% in personal income tax, but in the new system would pay 6.5%.
- In the current PIT system a taxpayer earning $12,000 would pay 4.9% of that income into taxes, and in the new system would pay just 3.2%.
- So, HB 119 would lower the tax burden on low-income New Mexicans and increase the tax burden on high-income New Mexicans while generating more revenue for the state in the process, thus diversifying our revenue base while offering relief to low-income New Mexicans
- According the FIR, HB 119 would generate $XXM in annual tax revenue. (The FIR is no completed yet, but when it is done we will incorporate their projections here.)
HB 120 Limit Capital Gains Tax Deduction
HB 120 would limit the capital gains deduction. New Mexico is one of only nine states to tax income from capital gains at a lower rate than the wages of hard working people. Currently, New Mexico allows 40% of this unearned income to be deducted from income taxes, making this an unnecessary and unfair tax break that overwhelmingly helps the wealthiest while making revenue unavailable for much-needed public investment. Approximately 85% of capital gains are generated by the wealthiest 5% of taxpayers. The FIR projects that limiting this tax giveaway for the wealthy would generate over $70M a year.
We will add summaries for other tax bills and expand the summaries for HB 119 and HB 120 as they become available.