Download this fact sheet (Nov. 2018; 2 pages; pdf)

Tax cuts for the wealthy limit New Mexico’s ability to plan for its future needs

Capital gains is income realized when something of value – stocks, bonds, real estate, etc. – is sold at a profit.

The Problem

  • In 2003, the New Mexico Legislature gave a big tax break to those receiving capital gains income. This tax cut allowed people to deduct half of their capital gains income from their state taxes.
  • Unfortunately, this deduction overwhelming goes to the highest-income earners – the people who are already paying the smallest share of their income in state and local taxes.
  • It also means that is this unearned income is taxed at a lower rate than money earned from wages.
  • This deduction costs the state between $20 million and $55 million every year – money that could go to schools, health care, and public safety instead.
  • There is no evidence that capital gains deductions promote economic growth or foster investment. It is an ineffective tax give-away, and should be repealed.

Why Now?

  • As a state that consistently has one of the highest rates of poverty, New Mexico should structure its tax code to help hard-working families, not to favor those who need the least help.
  • New Mexico is too reliant on revenue from the oil and gas industry – this keeps us in a boom-or-bust cycle. It’s impossible to plan for future needs when our revenue outlook is so uncertain.
  • Repealing the capital gains tax deduction will allow for a fairer tax system while generating sustainable revenue for the state.
  • This revenue can more effectively be invested in proven job creators such as a cradle-to-career education system that produces a highly qualified workforce.

Who gets this Tax Break?

  • 86% of the value of the capital gains deduction goes to just 12% of New Mexicans – those who earn more than $100,000.
    • Even more alarming, almost half (44%) of the value goes to the tiny number of New Mexicans who make more than $1 million.
  • In comparison, only 8% of the value of the deduction goes to the 67% of New Mexicans at the lower end of the income scale – those who earn less than $50,000.

The Bottom Line

The hard-earned wages of everyday working New Mexicans should be not taxed at a higher rate than the profits that the state’s wealthiest few make from selling stocks and bonds.

Download this fact sheet (Nov. 2018; 2 pages; pdf)
This fact sheet is part of our Roadmap to a Stronger New Mexico initiative. Find out more and sign up for email alerts here.