We should be very clear: what Trump and Republican leaders in Congress are proposing is not tax reform. Trump has touted it as a recipe for job creation and economic growth but its naked favoritism for the wealthy will do nothing to promote either.
Raising the minimum wage is an important and effective strategy for reducing poverty particularly given the erosion of the purchasing power of the state wage since it was last raised in 2009. In New Mexico, approximately 112,000 workers are earning the current state minimum wage of $7.50. In January, New Mexico lawmakers should act to raise the minimum wage to $10 per hour by 2018. While this increase should not be considered a living wage, thousands of families would benefit. (A Fiscal Policy Project report; state-level data on characteristics of minimum wage earners, including by race and ethnicity)
Unemployment benefits don’t just help keep laid-off workers afloat. They also help keep the state’s economy from tanking. But the state’s system has failed on both counts.
When it comes to state and local taxes, middle- and low-income New Mexicans pay a tax rate double what the wealthiest pay and part of this inequity is due to an extremely generous tax cut enacted by the Legislature in 2003. Those who have capital gains income—that’s income from the sale of stocks, bonds, real estate, and the like—can deduct half of it from their personal income taxes. As most capital gains income goes to people who already have the most money, those are the tax filers who receive the most benefit from the deduction.
It’s widely agreed that the poorest among us should not pay the highest tax rate, but in New Mexico (as in most states) they do. State and local taxes—particularly sales and property taxes (shown in the light blue and orange bars in the graphic below)—take up a higher percentage of incomes at the lowest end of the scale. That’s because the smaller your paycheck, the more of it you spend just on day-to-day living expenses—most of which are taxed.
While profitable corporations require roads, police protection, and other public infrastructure and services as much as the rest of us, New Mexico has ensured that they will be paying much less of the cost to maintain them. The tax cuts for corporations enacted by the state Legislature and signed by the Governor in 2013 are proving to be much more expensive than originally estimated. So much so that within the next few years we will lose 60 percent of our corporate income tax revenue.
Unemployment insurance (UI) has both a moral and an economic dimension—and New Mexico’s UI system has failed on both fronts. From a moral point of view, the intent of unemployment insurance is to keep people who are unemployed through no fault of their own from falling into financial ruin when they lose a job. The economic rationale for the program is that UI, along with SNAP (food stamps), is one of the so-called “automatic stabilizers” that keep the demand side of the economy from collapsing when the nation falls into a recession.
Data for the first quarter of 2014 show that New Mexico is facing a severe shortage of the jobs our people need. The state’s unemployment rate is up and job growth is negative. New Mexico’s labor market is stagnant at best, according to the U.S. Census Bureau’s Current Population Survey, the survey of households used to estimate the unemployment rate.
It sounds like something out of a political thriller movie: hastily cobbled together legislation is railroaded through with a vote in the closing minutes of a session. The truncated debate that takes place is woefully uninformed because no one has had time to read the bill. Nor is there time for public input. This scenario did not play out in Hollywood, but in Santa Fe when legislators were given 35 pages worth of amendments to House bill 641 and told to vote on it before the clock struck 12. What they were not given was any meaningful information about the fiscal impact of what they were voting on. In fact, they were misled.
Unemployment insurance kept the state’s economy from collapsing during a time of ballooning unemployment. But that’s just one reason for keeping this program solvent. It’s also good for local businesses. Unemployment insurance (UI) replaces a [...]