Vice President for State Fiscal Policy
New Mexico policymakers are strengthening communities and families with their new budget and tax plans. Governor Michelle Lujan Grisham signed tax reforms into law last week that reduce tax breaks for multistate corporations and the wealthiest New Mexicans, boost incomes for 200,000 low-income households, and reduce the state’s overreliance on volatile oil revenues. Policymakers paired the tax package with a budget that, buoyed by a nearly $1 billion revenue surplus, substantially reinvests in children and infrastructure and advances racial, ethnic, and gender equity.
Boosted the state’s Earned Income Tax Credit (EITC) from 10 percent to 17 percent of the federal credit, putting about $40 million more into the pockets of 200,000 individuals and families. Children receiving additional income such as from the EITC are likelier to see their employment and earnings prospects improve. (See graphic.)
State policymakers also set a trigger for the top marginal income tax rate to rise to 5.9 percent in 2021 if revenues grow at less than 5 percent in the next year. While they abandoned an automatic increase to that rate in their final negotiations, the state is currently expected to hit the trigger anyway.
The tax changes and increased investments reverse a decade of tax cutting and austere budgets, and they will help reduce high poverty, poor child well-being, and barriers to opportunity for communities of color — all of which have prevented the state from reaching its full potential.