N.M. income equality among worst in U.S.

by Tripp Stelnicki, Santa Fe New Mexican
December 19, 2016

The gap between the rich and the poor continued to widen in New Mexico in 2015, with the top 5 percent of households earning an average of $254,096 and the bottom 20 percent making an average of $17,064, according to a new study.

Income inequality is worse in New Mexico than in 38 other states, according to the report by the nonpartisan Center on Budget and Policy Priorities in Washington, D.C., which analyzed 2015 household income data.

The data for New Mexico reflect a national trend that helped to stoke voter discontent in this year’s presidential campaign and to fuel the populist bids of President-elect Donald Trump and Vermont Sen. Bernie Sanders, the runner-up for the Democratic presidential nomination. Former Secretary of State Hillary Clinton, who promised an economy that works for everyone, beat Sanders in the Democratic primary in New Mexico.

The average income in 2015 for the richest 5 percent of households in New Mexico worked out to nearly 15 times that of the poorest 20 percent. That ratio is slightly higher than the national average, using data for families of four.

Inequality has been dramatically worsening in New Mexico for decades, according to the report. Since 1979, the top 1 percent of households in the state has experienced a 55 percent growth in income, while the average income for all other households has fallen by 9 percent, according to the center’s analysis of Internal Revenue Service data.

“If you’re in the poorest household, or the middle household, you’re gonna have trouble getting by,” said Elizabeth McNichol, the study’s author.

The gap between the very rich and everyone else has long been expanding nationwide, as well.

America’s top 1 percent has more than doubled its share of the nation’s total income since the middle of the 20th century, according to The Institute for Policy Studies, a left-leaning think tank.

The Center on Budget and Policy Priorities report identifies three causes of worsening inequality: Wages are growing only for those at the top; income from investments, such as capitals gains, is increasing, mainly benefiting high-income earners; and government inaction, including increasing the inflation-weakened federal minimum wage, is leaving needy families in the dust.

In every state, the average income for the richest 5 percent of households is at least 10 times greater than the bottom 20 percent, according to the CBPP study.

The worst ratio is in New York, where the richest households earn almost 20 times more than the poorest; at the bottom of the list is Utah, where the richest earn slightly more than 10 times that of the poor. The national average is just under 15 times.

New Mexico has regularly ranked at or near the bottom in national welfare metrics. In September, a Census Bureau survey found New Mexico’s median household income had slipped from 43rd to 45th among the states between 2014 and 2015 and median household income in New Mexico had grown only 1.2 percent, lagging behind the national growth of 5.4 percent.

That same Census report also found 20.4 percent of New Mexico residents live below the poverty line. The rate had improved slightly from 2014, although New Mexico remained 49th nationally, ahead of only Mississippi. And a report in January from the Albuquerque-based advocacy group New Mexico Voices for Children found the state has the highest rate of child poverty in the nation.

States have made income inequality worse by putting the tax-system onus on low- and middle-income earners, McNichol said. New Mexico and other states can begin to amend the income trends through tax reforms that benefit more than businesses and a select few at the top, she said. Referencing a package of tax breaks for businesses signed by Gov. Susana Martinez in 2013, McNichol said, “

[New Mexico] is kind of moving in the wrong direction.”

James Jimenez, executive director of New Mexico Voices for Children, said the income data show New Mexico has not effectively addressed poverty and has further disadvantaged low- and middle-income residents with a tax system that he argues benefits higher-income earners. Then-Gov. Bill Richardson signed legislation in 2003 that lowered the top marginal personal income tax rate. Also cut were taxes on capital gains.

“These are tough economic times, and when the revenues coming into our state and local governments are not adequate to fund education, workforce training, early care – the kinds of programs that have a direct impact on people having the ability to achieve economic prosperity — it’s a double whammy,” Jimenez said.

Amid the state’s ongoing financial woes, legislators warned earlier this month that further cuts to the Public Education Department were looming.

Jimenez said he supports the recently revived push to draw revenues from the state’s nearly $15 billion Land Grant Permanent Fund to expand early childhood education. It would be a long-term investment in people, he said, and their opportunities to advance economically.

“The approach that Bernie Sanders and Donald Trump both took during their campaigns, this notion that the economy is not working for people, is borne out by this report,” Jimenez said.

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