A Holiday Present for New Mexico's Leftists
New Year's Day, the 'rich' will pay more of their 'fair share'
On January 1, 2021, a new rate will be implemented for the Land of Enchantment’s personal income tax (PIT). The flat-ish 4.9 percent burden placed on most workers will be joined by an upstairs neighbor — a 5.9 percent rate, applied to what some consider “affluent” earners.
But rest assured, for New Mexico’s army of “progressive” activists, it won’t be enough.
First, the details. The 5.9 percent rate kicks in at different income levels for different types of filers:
* married individuals filing separate returns: over $157,500
* heads of household, surviving spouses, and married individuals filing joint returns: over $315,000
* single individuals and for estates and trusts: over $210,000
The legislation that created the higher rate was enacted in 2019, and contained a 33 percent increase in the tax on motor-vehicle sales, a 20 percent reduction in the capital-gains deduction, and the closing of the “loophole” on untaxed Internet sales. New Mexico’s resentment lobby was delighted with the omnibus bill — passed, as the Tax Foundation dryly noted, at a time when “the state is running a large surplus” — and its PIT provision demonstrated that for the state’s Democratic Party, tax competitiveness was no longer a goal.
Eighteen years ago, Richardson devoted considerable political capital to cutting income taxes. He secured near-unanimous support from Democratic lawmakers for major relief, and in 2006, even won praise from the editorial page of The Wall Street Journal:
Since winning the state house in 2002, he has cut the state’s top income tax rate to 4.9% from 8.2% and cut the capital gains tax in half. “This was our way of declaring to the world that New Mexico is open for business,” Mr. Richardson tells us. “After all, businesses move to states where taxes are falling, not rising.” But don’t tax cuts produce budget deficits? Not in New Mexico, which now has a half-billion-dollar surplus and has seen tax revenues soar by 27% this year, faster than in any other state over the past year.
Indeed, contrary to the wailing of liberals, revenue derived solely from the Land of Enchantment’s income tax rose in the years following the commencement of rate cuts. (See below.) It was only the Great Recession, and a subsequent decade of zero net job growth, that produced disappointing returns through the present day.
Oh, well. That was then, this is now. And a single hike in the top rate is hardly enough for the forces of Big Government. Last week, a “study” by a consulting firm hired by the liberal Rockefeller Family Fund recommended that New Mexico:
Reinstitute a rate structure with higher marginal PIT rates at higher income levels. From 2002-2009, New Mexico made a concerted effort to lower its top PIT rate. These changes significantly lowered PIT collections from the state’s higher income taxpayers. For example, the District of Columbia’s yearly tax burden analysis calculated that for a New Mexico family of three earning $150,000 a year, the average PIT payment was $7,268 in tax year 2000 and declined to $5,764 in 2018, a reduction of 20.7%; in 2018 constant dollars, the decline would be 45.6%. In 2000, the New Mexico tax burden for this income cohort ranked 26th among the states with a PIT and was the median of all states. In 2018, the New Mexico tax burden for this income cohort ranked 35th, and the median was $7,307. Clearly, New Mexico is now imposing a smaller PIT burden on higher income taxpayers than most states.
At the same meeting of the Revenue Stabilization and Tax Policy Committee, New Mexico Voices for Children, the ultra-left activist organization with deep pockets and reliably puffy media coverage, demanded that the state “continue to fix our upside-down tax code and ensure the wealthiest pay their fair share by introducing additional brackets at the high end of the income scale.”
One of the worst unemployment rates in the nation. An economy dominated by public-sector jobs, government subsidies, and welfare programs. Perhaps the worst crime problem in America. A unionized, monopoly school system that prefers power and politics to choice and competition. And now, a higher PIT and growing pressure for additional increases to the levy.
Does that sound like a state likely to attract entrepreneurs and investors?