Commentary: Most New Mexico families with children – 70% – will get a break on their state personal income taxes when they file their 2019 tax returns, thanks to legislation enacted in April by the state Legislature and Governor Michelle Lujan Grisham. That’s according to an analysis by the Washington, DC-based Institute on Taxation and Economic Policy (ITEP), released today in coordination with New Mexico Voices for Children.
“Our state lawmakers made great strides in putting working families first this year – especially families with children,” said James Jimenez, executive director of New Mexico Voices for Children, which partners with ITEP on state tax policies. “These tax changes will really help our working families as well as help make our tax code fairer and more stable.”
The legislation – HB 6 – makes two changes that will help families with children. It increases the Working Families Tax Credit – the state version of the federal Earned Income Tax Credit, which has long been hailed as the best anti-poverty initiative to come out of Congress – and it creates a new deduction that fixes changes made in the federal tax code last year that fell particularly hard on families with children. Between the two changes, $64 million will be returned to New Mexico families with children, benefiting more than 385,000 New Mexico kids.
Two other provisions aim to make the state’s tax system slightly more fair by raising income taxes on a tiny share of tax filers – just 5%, most of them in the highest income brackets. One of these provisions will only occur if revenues do not meet a certain level and, if triggered, will not impact income tax rates until 2021.
“New Mexico has an upside-down tax system,” said Lisa Christensen Gee, the director of special initiatives for ITEP. “Meaning those with the largest incomes pay the smallest share of that income in state and local taxes, while those with the lowest incomes pay the highest share. These tax changes help right that imbalance, but we still have a long way to go.”
“Besides the fairness issue, the overall tax legislation makes our tax system more stable, which is important when we rely so heavily on revenue from the boom-and-bust oil and gas industries,” said Jimenez. “Legislators like Reps. Jim Trujillo and Javier Martinez – and all of the HB 6 sponsors – know that we must have stable sources of revenue if we’re to make consistent investments in public services and infrastructure – like schools, hospitals, and roads – that are vital to building a stronger New Mexico,” he said.
Research and policy analysts from NM Voices will be presenting the analysis to the Revenue Stabilization and Tax Policy Committee on Oct. 24 in Santa Fe.
· A table with ITEP’s data analysis is available here.
· A factsheet on ITEP’s data analysis is available here.
· An estimate by NM Voices of the impact of the Working Families Tax Credit increase by legislative district is available here.