The Budget & Progressive Revenue Measures

medicaidThe Budget

Reverend Barber is known for having said:  “There are moral budgets and there are immoral budgets,” and I have extended that thinking to say that alls budget tell a tale about our morality, our values and what we believe the role of government is.

Right now our governor and unknown number of our legislators believe that at all costs, no new revenues can be created to fill what is now projected to be a $300-500 million hole in the 2018 fiscal year. Retake Our Democracy believes that a moral budget mandates that this hole be filled with new revenue. Otherwise we would need to make even more drastic cuts to vital services, many of which have already seen deep cuts over the last year, or generate significant revenue.
One of the main components of the budget, is Medicaid. That will be part of the overall budget in House Bill 2. Martinez’s Human Services Department is requesting only $42 million for Medicaid. However, the budget need is deeper than that. Medicaid needs $78 million in new state funding to prevent further cuts to healthcare services:
  • $42 million, to reinstate healthcare provider rates that were reduced last year
  • $26 million, and to provide startup funding to have Medicaid cover home visiting services for young children
  • $10 million, to provide startup funding to have Medicaid cover home visiting services for young children.
If Medicaid is cut instead, patients will likely lose healthcare services such as dental, vision and other benefits while paying higher fees and copays, and healthcare provider rates will be targeted again. The gap between what is needed and what is being proposed is $36M. And differences in what is needed and what is being proposed are evident everywhere in the budget that is being developed between now and Feb 16.  Below are a number of ‘moral’ tax bills that together could generate $245M in new revenue for FY 2018. The tax proposals generating the largest share of the new revenues  would tax individuals making over $187k and families making over $375k a year. These measures will all be part of the Scales of Justice: A Justice Report Card on the 2017 Roundhouse Legislature.

Progressive Revenue Measures that Could Spare Cuts to Medicaid and Other Important Components of the Social Safety Net 

  • HB 117 – Supplemental Income Tax (Rep. Roybal Caballero) – Creates phased-in supplemental income tax increase for higher income individuals (married but filing separate and single individuals who make over $100k; Married, filing joint and Head of Household filers who make over $150k); FY 18 Fiscal Impact = $17.2 million.
  • HB 201 – New Top Income Tax Bracket (Rep. Ely) – Increases tax rate for highest earning households (Married, separate filers who make over $230k; Married, joint filers who make over $460k; Single filers who make over $306k) by 1%; FY 18 Impact = $7.8 million; FY 19 = $15.9 million, FY 20 = $27 million.
  • HB 282/SB 231 – Increase Cigarette & E-Cigarette Taxes (Reps. Thomson & D. Armstrong; Sen. Morales) – Increases cigarettes excise tax on packs of 25 by $1.88 and packs of 20, 10, 5 by $1.50; also increases tobacco products tax from 25% to 75% of the product value; expands definition of tobacco products to include e-cigarettes. Estimated to generate about $65 million dollars for the general fund.
  • House Bill 311: Increase Working Families Tax Credit (Rubio) – increases working families tax credit and limits the capital gains deduction.
  • Senate Bill 344: Income Tax Rates & Pre-K Funding (Tallman) – Adds new top income tax bracket, repeals capital gains deduction, distributes portion of tax revenue to Pre-K programs.
  • SB 50 – Additional Upper-Tier Tax Brackets (Sen. O’Neill) – Adds upper-income tax brackets for married individuals filing separately and making over $187,500 (8.2%); married individuals filing jointly and making over $375,000 (8.2%); and single individuals making over $250,000 (8.2%); Estimated to generate around $98 million to general fund in fiscal year 2018.
  • SB 199 – Delay Certain Tax Changes (Sen. Smith) – Delays corporate income tax phase down for two years; No fiscal impact report released yet as of 2/5/17.
  • SB 264 – Taxation of Internet Sales (Sen. James White; Rep. Carl Trujillo) – Establishes internet sales tax; mainly targeted at large out-of-state internet sellers; Fiscal impact is uncertain and, according to the fiscal impact report, ranges from generating anywhere between $8M and $38M in fiscal year 2018.

Some Talking Points to Consider:

  • Budget cuts are deeply damaging New Mexico (describe what you are most concerned about)
  • Our hard-working families are paying for budget cuts while we give away hundreds of millions in special tax breaks and loopholes – these are running up the budget deficit and must be closed.
  • For personal income tax: New Mexico’s tax code is unfair — low-income families pay a higher percentage of their income towards taxes than the highest income households, after adding up all sales, income and property taxes (see this chart for reference). The only way to make this system fair is by ending tax breaks that have been given unnecessarily to upper income households so that everyone is contributing their share.
  • For capital gains deduction repeal: The capital gains deduction is a tax break for unearnedinvestment income (such as from the sale of stocks or real estate) that primarily benefits upper income households. This income should be taxed just like the hard-earned wages that most of us must pay taxes on.
  • For cigarette tax and e-cig: Smoking has heavy costs on our healthcare system. Tobacco taxes are proven to reduce consumption – especially among teenagers — and result in healthcare savings.