By
Gerry Bradley, Research Director
New Mexico Voices for Children
It's
one thing to have a budget shortfall due to circumstances beyond your control.
An economic downturn, for example.
It's quite another to create one in order
to give the wealthiest among us a big tax break. New Mexico did just that in 2003
when policymakers passed the most drastic personal income tax cut in New Mexico
history. It could be called the Reverse Robin Hood tax cut. The top income tax
rate of the highest income tax filers was reduced significantly (from 8.2 percent
to 4.9 percent), while the rate of the lowest earners stayed the same. The wealthiest
got a $13,000 tax cut. Those in the middle got about $100. The lowest income got
nothing.
The tax cut that is now taking effect is blatantly unfair. And
it's causing some problems already, and huge problems a little further down the
road, for New Mexico's capacity to pay for basic state government services, like
education and healthcare.
In New Mexico, the lowest fifth of income earners
pay taxes at a rate of 12 percent, while the fifth with highest income pay only
a third of that. This is immoral and unjust. New Mexico tax policy is shifting
responsibility for funding state government from the wealthy to lower income taxpayers.
Those least able to pay are shouldering more of the burden.
There might
be some small consolation for our working, lower-income families if the services
they got were stellar, but they're not. Nearly 60,000 low-income children remain
uninsured - an increase over last year. Childcare subsidies for low-income working
families are likely to be reduced. Math and reading scores are still 49th in the
country.
A study released this week by the Center on Budget and Policy Priorities
said New Mexico is at "high risk" for a structural deficit (with a risk
factor of 9 out of a possible 10). The Center's study confirmed what New Mexico
Voices for Children has been pointing out for over a year. The 2003 tax cut giveaway
for the well-off is taking so much money out of the state's budget each year that
there will be a significant gap in the next few years between what we need to
pay for expected, annual expenses and what we'll have from tax collections.
Bad
policymaking. Our policymakers have tried, unsuccessfully, to fill in the gap
by raising taxes in other areas: cigarettes, for example. And high prices for
oil and natural gas result in high severance taxes and corporate income taxes
- for a while. But as the spike in oil and gas prices tapers off in the next couple
of years, the folly of the personal income tax cuts will be plain for all to see.
Those who remember the financial roller coaster ride in the 1980's caused by unstable
oil and gas taxes dread a repeat of that experience.
James Jimemez, the
Secretary of the New Mexico Department of Finance, flatly denies that there is
a problem, stating that 'we've seen that the New Mexico economy continues to outperform
what we've expected. The structural deficit is premature. We haven't seen it.'
(Albuquerque Tribune, June1, 2005) Most people think the role of policy makers
is to plan and act before a crisis hits. As Secretary Jimenez surely knows by
now, employment growth in New Mexico has fallen below what was forecast for the
first four months of this year. The predicted job growth was 2.3 percent - about
20,000 jobs. Actual job growth has been 1.8 percent - about 15,000 jobs. The Richardson
administration promised that the 2003 personal income tax cuts would stimulate
the economy. If they were, we would see higher (not lower) job growth than was
predicted. Instead, we've seen 5,000 fewer jobs than was predicted.
This
is a problem that was created by our elected representatives and they can fix
it. Rolling back the 2003 personal income tax cuts is a necessity, both for reasons
of fairness and of responsible budgeting. This should be on the short list of
bills to be passed by the 2006 legislature. Or we can pretend that we're seeing
light at the end of the tunnel, when what we're really seeing is a train wreck
headed our way.
