by James Jimenez, New Mexico Kids!
Dec. 15, 2019
Although we all benefit from the infrastructure and services that are paid for with our taxes – education, roads and bridges, public safety and health care – nobody loves having to file their income tax returns. But when New Mexico families with kids file their state income tax returns this year, most of them are in for a pleasant surprise. Two income tax cuts were passed during the 2019 legislative session that will mostly benefit hard-working families with children.
The Working Families Tax Credit (WFTC) is the state version of the federal Earned Income Tax Credit (EITC) – so if you qualify for the EITC, you qualify for the WFTC too. Both credits return money to families who work hard but still struggle to make ends meet. The amount you are refunded is based on how much income you earned over the past year. The WFTC returned some $53 million to New Mexico families in 2017, with most of that money going to
families with children. Nearly half (44 percent) of New Mexico’s children benefit from this tax credit. It’s one of the few policy proposals (tax or otherwise) that has long had strong bipartisan support.
The state increase will send an additional $36 million back to working families this year. These tax credits are also great for our small businesses and economy because research shows that the money is spent quickly and locally.
Many New Mexico families will get additional good news this year when they file their state tax return. Last year, because of tax changes made at the federal level in 2017, many families with children actually saw an increase in their state income taxes. To fix that, the Legislature created a deduction worth $4,000 for each dependent beyond the first. This deduction will return another $27 million to New Mexico families with children this year.
These two changes were just a small part of a much larger tax package enacted last year. You may be familiar with some of those changes because they’ve been covered in the news – the tax on cigarettes increased, the tax on cars was increased, and the income tax rate for those in the very top brackets will likely go up slightly in two years. Other provisions in the tax package will help New Mexico’s small businesses compete against out-of-state corporations because it closed some loopholes that gave the big guys an unfair advantage.
In all, the tax package that was passed last year was a win for New Mexico families with children. It also protected revenue that we need for our classrooms, road repairs, and health care while still giving working families a much-needed break. There is still work to be done in 2020 to make the tax system fairer – we’ll be fighting for a state child tax credit and for expanding the WFTC to some of the working families who are currently excluded – but 2019 was a great start.
Copyright 2019, New Mexico Kids! magazine (https://issuu.com/newmexico-kids/docs/jan_feb_20web)