Celebrate Democracy: It’s Tax Day!

by Raphael Pacheco, MBA
April 17, 2018

Growing up in Clovis, New Mexico, my favorite place to go as a kid was Clovis-Carver Public Library. Although it has been several years since I last visited the cozy library right across Main Street from the courthouse, I still see it as my second home. During the summers, my mom, a public school teacher, would take my sister and me to a program called Story Hour where the librarians would read aloud a book to the kids in attendance. After the story, sometimes we would have a guest speaker; it was always someone from the community, like a police officer, or a firefighter, or once we had a zookeeper from Hillcrest Park Zoo bring in some of their animals to talk about. Once Story Hour ended, my mom let me and my sister loose in the library where we proceeded to quietly raise hell. Checking out and reading hundreds of books about Egypt and Goosebumps, about pirates, kings and queens, and folklore and other fiction that transported us to other worlds. Appropriately, somewhere else in the library (hopefully not the children’s section) was a book on what made this beautiful childhood experience possible. A book about taxes. (Fun fact: everything underlined in this paragraph is funded at least in part by state and local taxes.)

While it’s easy to tick off a list of the things we enjoy that are paid for out of our taxes, paying taxes is really a moral duty that we all participate in. It is a contract that we honor collectively because it’s the way we invest in our communities. In fact, some research shows that Americans see being a taxpayer as a role worthy of pride and respect. Unfortunately due to the Tax Cuts and Jobs Act (TCJA) signed into law last December—not to mention the many trickle-down tax cuts that came before it—the responsibility of paying taxes is not distributed equitably. Namely, the tax cuts that were enacted largely benefit the wealthy and large corporations, according to an analysis done by the Institution of Taxation and Economic Policy on the TCJA. For example, the top 1 percent will receive the lion’s share of the tax cut in nearly every state—and New Mexico is no exception.  New Mexican families with the highest incomes—those with incomes in the top 40 percent—will get 85 percent of New Mexico’s total tax cut. Far more than the 15 percent that the majority of us—those with incomes in the bottom 60 percent—will receive (see figure below).

An uneven, inequitable tax cut is bad enough. Our nation’s tax code is thrown even further out of balance by the permanent tax cuts for corporations made possible through the TCJA. These tax cuts will all simultaneously drive up federal deficits and that will be used as an excuse to force cuts to food assistance, health care, and other programs that benefit millions of Americans. That money would be put to much better use repairing our roads and educating our children.

Cuts to federal programs will only put more pressure on state budgets to compensate for the loss of federal funding. Federal funding accounts for 41.4 percent of all government spending in New Mexico, but thanks to insufficient state revenues, the state has still had to make deep cuts in spending over the past decade. Since the recession, we’ve cut K-12 education by 14 percent on a per-pupil, inflation-adjusted basis and the state could lose a multi-million dollar lawsuit for underfunding education as a result. We’ve cut higher education by 33 percent, which resulted in incredible increases in tuition, and our students have more debt than students in almost every other state. Only a small fraction of New Mexico’s children receive NM Pre-K and state-supported home visiting services and our child care assistance program is serving thousand fewer families than it did in 2010.

Of course, our deep cuts to education were due to more than the recession. They’ve also been the result of state-level tax cuts that went disproportionately to corporations and the wealthy but have done nothing for our sluggish economy. The state’s revenue levels are just barely back to where they were before the recession and now we could face significant cuts from the feds. It is our imperative as a state to create a strong, fair economy and we can do so with cleaner, more equitable tax codes that make corporations and wealthy individuals pay their fair share and bring in the revenue we need to invest in our communities. New Mexico Voices for Children’s Blueprint for a Prosperous State outlines several common-sense paths to a more prosperous economy.

So call me crazy but I really enjoy Tax Day because I am truly proud to pay taxes. If voting during Election Day is a self-expression of our values, then filing our tax returns on Tax Day is the method through which we celebrate those values. Taxes provide the resources to make shared investments in the things we all care about like a cleaner environment, public health, and quality schools. Ever wonder how White Sands National Monument and other public spaces stay clean? Or how we have this magical faucet in our homes that we can turn on and out comes life-sustaining water that is safe to drink, cook with, and bathe in? Remember your favorite teachers in elementary school and the impact they had on you as a kid? You have these awesome experiences because of investment in our communities through taxes that have led to greater opportunities that we all can enjoy.

Raphael Pacheco is a research and policy analyst and State Priorities Partnership Fellow.

Imagine not being counted

by Jacob Vigil, MSW
April 5, 2018

If you’ve ever done much research on your family history, you’ve likely run across old census records. These yellowed documents—many hand-written with quill and ink by enumerators who went door-to-door to gather the information—were used to determine how many representatives each state had in Congress. Today’s Census is still incredibly important, but now it is much more high-tech. It involves cutting-edge technology, years of planning, extensive research, and thousands of Census workers across the country. Far from being a thing of the past, the decennial Census count that takes place every ten years determines crucial day-to-day realities for all residents in the U.S. It determines voting and school districts, political representation, and how billions in federal dollars are spent across the country—including $6.2 billion every year in New Mexico alone. But now, the Census—and everything that relies upon it—is under threat.

The recent decision to include a question on citizenship status in the 2020 decennial Census is certain to increase the number of people who won’t respond to the census. And that’s exactly the political motivation behind the decision to include a question that hasn’t been asked since 1950.

This change will be particularly bad for New Mexico.

The Constitution mandates a full count of everyone residing in the country every ten years. Aside from allowing for fair political representation in Congress, the census also determines how much of the money that we pay in federal taxes will come back to our state to help pay for schools and colleges, highways and health care, services for veterans, transportation, and other necessities. Businesses and entrepreneurs use census data to make critical decisions about hiring, consumer needs, and where to locate factories and stores. Additionally, hundreds of millions of dollars for programs serving Americans who have fallen on hard times—programs such as Medicaid, school lunches, and SNAP (food stamps)—are allocated based on census counts. Given New Mexico’s status as one of the poorest states, any impact to the allocation of those funds would hit our state especially hard. An undercount of just 1 percent could cost the state $600 million over the next ten years.

This policy is an act of erasure that will render certain populations invisible in terms of representation and public spending.

One thing is clear to the hundreds of civil and human rights organizations, local governments, and elected officials who have spoken out in opposition to the question: this is a move designed to scare already hard-to-count populations away from participating in the Census. New Mexico has historically been home to a large number of these hard-to-count populations: Latinos, Native Americans, immigrants, and people living in rural areas, in areas without internet access, and in poverty. In addition, New Mexico is one of 12 states with a population of undocumented immigrants that is higher than the national average. Adding the citizenship question, which is likely to dissuade some New Mexico residents from responding, will make this problem worse because many immigrants—regardless of their legal status—simply won’t be counted.

When immigrants aren’t counted, their children also aren’t counted—even though 80 percent of children with immigrant parents are, themselves, U.S. citizens.

The addition of a citizenship question is particularly troublesome given recent aggressive moves by ICE to target immigrants without documentation. People are afraid to go to work, take their kids to school, go to court to pay a traffic fine, even travel to another state because they know they could encounter an ICE agent at any point. Threatening certain groups or telling them they are not part of this country does not reflect our values as a nation.

While the implications of this sudden and unnecessary policy are bleak, there is much that can be done. State attorneys general—including New Mexico’s—have filed lawsuits asserting that the addition of the question is unconstitutional, and members of both houses of Congress are calling for hearings to consider legislation and hear testimony on the issue.

State and local government leaders need accurate information to make decisions regarding their constituents and communities. Your state and local elected leaders can help save the census. Tell them to join you in urging their congressional delegation to overturn this effort to undermine the census. Find who your state and local elected officials are and how to contact them online.

An accurate census is critical for our democracy and every New Mexican deserves to be counted and equally represented. The stakes are too high for an inaccurate 2020 Census, but we must all do our part to ensure that everybody in New Mexico counts.

Jacob Vigil, MSW, is a research and policy analyst for New Mexico Voices for Children.

A Blueprint for a prosperous state

A Blueprint for a prosperous state logo

Download this policy brief (Jan. 2018; 4 pages; pdf)
Download just the policy recommendations (Jan. 2018; 4 pages; pdf)

Building a better New Mexico

We all want a prosperous state, but prosperity requires investments. You can’t grow a garden without good soil, sunlight, water, and some hard work. Same with a state—you can’t have prosperity without resources, infrastructure, and a skilled workforce.

But instead of following an investment strategy to prosperity, New Mexico has tried to cut its way to prosperity. You could call this the “don’t build it and let’s hope they will come anyway” strategy. Or perhaps the “magical-thinking-of-trickle-down-economics” strategy.

This has been the wrong strategy for New Mexico.

Building a prosperous state will take a more sensible approach. If we could recoup the millions of dollars in tax breaks we’re losing to well-connected special interests, we’d have money for the public investments our businesses and economy need. Investments like a well-educated and skilled workforce, state-of-the-art health care, up-to-date communications infrastructure, and affordable child care, to name just a few.

The recession hit New Mexico hard. Revenues plummeted. The state’s investment in health care, education, and other essential services declined.

As the economy started to improve, lawmakers made a fateful choice—massive tax cuts in 2013 for corporations, instead of investment in the common good.

The tax cuts, it was promised, would bring jobs to New Mexico.

But tax cuts don’t create jobs—public investment creates jobs. No business can operate here or anywhere else without a skilled workforce and customers with money to spend. These are only created when we invest in our human capital.

The lost decade

Failed tax cuts and the recession led to a lost decade where the state budget failed to keep pace with inflation and population growth. And when new threats have appeared—such as the opioid epidemic—the state has had no money set aside to solve such problems.

After years of flat budgets and spending cuts that have severely compromised our schools, universities, and other vital systems, a better revenue picture has finally been forecasted for the state.
But we had barely heard the good news when it was followed by bad. This money has yet to materialize and already some lawmakers are talking about spending it on tax rebates that will do little to spur economic activity. The fact is, we need to invest every bit of that new revenue into vital services like health care and education.

In fact, this new revenue doesn’t even begin to make up for all the money we’ve lost by enacting failed tax cuts for the well-connected. We also need to recoup lost revenue so we can make the investments our state needs in order to prosper.

New Mexico state budget, FY18

The path to a more prosperous economy

The path to a strong New Mexico begins with making smart investments. Investments that would shrink class sizes in our schools, provide child care for more hard-working families, allow us to reopen the school-based health centers that had to close, and lower college tuition to what it was before we made all the deep cuts to higher education funding. There are many common-sense ways to raise new revenue, which could be used to educate our workforce, create jobs, and bolster our economy:

• Repeal the 2013 corporate income tax cuts
The big corporate tax cut of 2013 cost more than expected, and it’s also failed to create jobs. There is no excuse for keeping bad tax policy on the books and New Mexico lawmakers need to repeal this one.

• Could raise more than $100 million a year.

• Repeal the tax break for manufacturers
At the same time the corporate income tax rate was cut, the formula for how manufacturers were taxed was changed so that companies like Intel could get away without paying any taxes. But Intel has since cut jobs in New Mexico.

• Could raise $45 million a year.

• Raise the personal income tax rate for those at the top
In 2003 New Mexico cut the personal income tax rate by nearly half for the wealthiest households. As it is now, the wealthiest pay less of their income in state and local taxes than most of the rest of us. (See the graphic below for just how unfair our tax system is.) Meanwhile the GOP tax plan signed into law at the end of last year gave more tax cuts to the wealthy. Raising income tax rates for very-high income New Mexicans will raise much-needed revenues and help to turn our upside-down tax system right-side up.

• A full repeal of the 2003 cuts would raise $500 million.

New Mexico state and local taxes paid by income quintile

• Curtail tax breaks for capital gains income
New Mexico taxes income from capital gains (profits from the sale of assets such as stocks or real estate) at half the rate that it taxes the wages of working people. This break mainly helps the wealthiest—those making over $200,000—while taking revenue away from much-needed public investments. It also helps make our tax system less fair.

• Could raise $44 million-$48 million in FY19.

• Repeal wasteful and ineffective tax breaks
There are hundreds of tax breaks that have been carved out of the gross receipts tax (GRT) base over the years, many of which simply qualify as a handout to special interests. What’s more, few of them have ever been evaluated for effectiveness. Repealing wasteful and ineffective tax breaks will allow lawmakers to put that money to work in our schools and communities where it will benefit everyone.

• Could raise hundreds of millions.

• Require all out-of-state corporations to pay income tax on their profits in New Mexico
New Mexico is one of the few states that still allows out-of-state corporations to shift their New Mexico profits on paper to another state to avoid paying taxes here. We lose millions in revenue, and local businesses can’t compete. A partial fix (called Mandatory Combined Reporting) was enacted in 2013, but it exempted many profitable corporations such as banks.

• Could raise $25 million.

• Increase the distribution from the Land Grant Permanent School Fund
New Mexico has the nation’s second largest Land Grant Permanent School Fund, now with more than $16 billion. Legislators and voters could choose to increase the distribution of that fund, which would help us better fund K-12 schools and our higher education system, as well as invest a tiny portion in the early childhood education programs that will help our kids do better in school so more of them can attend college.

• Increasing the distribution by 2% provide an additional $300 million for education.

• Enact a health care provider assessment
Instead of facing cuts in Medicaid reimbursement rates, many health care providers are asking to be assessed a provider fee. The money collected could then be added to the state’s Medicaid budget, allowing the state to draw down federal matching money and prevent additional cuts to health care services for children, the disabled, and elderly.

• Amount raised would vary depending on rates.

• Raise alcohol and tobacco taxes and include e-cigarettes
These taxes could both increase revenue and promote greater wellness, particularly when they act as a disincentive for young people to take up smoking.

• A tax increase of $1.50 a pack would raise an additional $90 million.
• An increase in the alcohol tax of 25-cents a drink could raise $154 million.

• Increase the tax on the sale of motor vehicles
New Mexico’s excise tax on motor vehicles is lower than the general sales tax on most other goods purchased in the state. It’s also lower than in surrounding states, and could stay lower even if it was increased.

• Could raise about $100 million.

• Extend the gross receipts tax to more internet sales
“Main street businesses”—those with a brick-and-mortar presence in New Mexico—pay gross receipts taxes on their internet sales here, but businesses without a physical location in the state don’t. This exemption drains a lot of revenue from the state and puts local retailers at a competitive disadvantage.

• Could raise more than $25 million.

• Enact a new tax on diesel fuel
A large portion of this tax would be paid by out-of-state entities like interstate trucking companies.

• Amount raised would vary depending on rates.

Keeping New Mexico on track

By making some of these common-sense fixes to our state’s tax code, New Mexico could be back on the path to making the investments that our businesses and communities need. But we also must make a change to ensure that we stay on track:

• Require a tax expenditure budget in statute
A tax expenditure budget allows legislators to see the hundreds of tax exemptions, deductions and credits they have enacted over the years. This makes it easier to review tax expenditures for their cost-effectiveness and repeal those that do not grow the economy. While the tax department does produce a tax expenditure budget under executive order, requiring one under state law would give legislators more authority over which expenditures are studied.

Download this policy brief (Jan. 2018; 4 pages; pdf)
Download just the policy recommendations (Jan. 2018; 4 pages; pdf)

A Fiscal Policy Project publication.
The Fiscal Policy Project, a program of New Mexico Voices for Children, is made possible by grants from the Annie E. Casey Foundation and the W.K. Kellogg Foundation.

Citizen’s Guide to New Mexico’s Tax System

How the State Collects Money and Why it Matters

CitizenTaxGuide-2017-cover
Download this citizen’s guide (updated Sept. 2017; 16 pages pdf)
Link to the Citizen’s Guide to the New Mexico State Budget
Link to the
Advocate’s Guide to the New Mexico State Budget
Link to the
Citizen’s Guide to Legislative Advocacy

Introduction

axes are the mechanism through which we accomplish things that benefit us collectively. Taxes are how we build the public commons like roads and bridges, electrical grids, and water lines, as well as how we educate our children, advance public health, uphold our laws, and prevent future problems. In short, we use taxes to manage many of the aspects of our complex society that we could not manage as individuals. Together, these public commons and other accomplishments form the foundation for our economy and enhance our quality of life. The things that we support with our taxes will pay dividends far into the future in much the same way that many of the roads, water lines, schools, and other infrastructure and public systems that we use today are the result of investments that were made in the past. The children we educated just a generation ago are the workforce of today just as the children we educate today will be the workforce of tomorrow.

Our elected officials are charged with drawing up the plans for what we will accomplish collectively and they do this through an annual budgeting process. But they also determine how the tax money that pays for these investments is collected. In other words, our lawmakers must decide who pays taxes and how much. How these decisions are made says a lot about our values and priorities. A tax code can spread the payments evenly among taxpayers or it can require some citizens to pay more and allow others to pay less.

This guide describes the basics of New Mexico’s tax system. Two companion publications, Citizen’s Guide to the New Mexico State Budget and Advocate’s Guide to the New Mexico State Budget, explain the basics of the state’s general fund budget, the budget formation process, and how citizens can promote their priorities within that process.

Some Tips for Using This Guide

Words that appear in boldface are defined in the Technical Terms and Tax Facts boxes. Acronyms used in this guide are written out in the box below.

Acronyms

CIT – Corporate income tax
EITC – Earned Income Tax Credit
FIR – Fiscal impact report
FY – Fiscal year
GRT – Gross receipts tax
LFC – Legislative Finance Committee
LICTR – Low-Income Comprehensive Tax Rebate
PIT – Personal income tax
TEB – Tax expenditure budget
TRD – Taxation and Revenue Department
WFTC – Working Families Tax Credit

Why Taxes Matter

People often ask why a child advocacy organization like New Mexico Voices for Children works on tax and budget issues. Wouldn’t it make more sense to advocate on issues that directly affect kids—like better nutrition in schools, higher quality foster care, and more anti-gang programs?

The state and federal tax systems also directly impact kids. The vast majority of the money the state or federal governments have to spend on services like schools, health care, and public safety comes from taxes. Every time the government cuts taxes for one group of people or businesses, it either has to raise taxes elsewhere or it has to cut spending. Spending cuts generally lead to cuts in services, which can have detrimental impacts on children. Cuts can lead to more crowded classrooms, fewer caseworkers for investigating child abuse or for recovering child support payments from noncustodial parents, for example.

Tax systems also directly impact working families and that impacts kids. The more money a working family spends on taxes, the less money they have for necessities like nutritious food, health care, and books that help their children succeed. Surprisingly, as we will see later on, those with the lowest incomes pay the highest percentage of their income in state and local taxes.

How the State Collects Money

General Fund Revenue Sources

This guide focuses on revenues that are deposited in the state general fund, which is the state’s main pot of money for operating expenses. Figure I (below) shows where the state gets its tax revenue, and how much is expected to be generated for fiscal year 2017 (FY17). The largest slice of the pie (34.3 percent) comes from general sales taxes. This includes gross receipts taxes (GRT) and compensating taxes. GRT is levied on most goods and services and is often passed along to the consumer. Including services in the tax base is good because services constitute an increasing share of economic activity while goods constitute a decreasing share. Because of this, more states are beginning to tax services. Many cities and counties in New Mexico also collect GRT to pay for municipal services, so the amount you pay will vary depending on where you are in the state.
Personal income taxes (PIT) make up a much larger percentage (23.8 percent) of revenue than corporate income taxes (1.2 percent). Corporate income taxes are levied on a corporation’s net profits, which can fluctuate widely from year to year. Also, the Legislature has enacted many tax breaks and significantly lowered the overall CIT rate in 2013.

Excise taxes on the sales of tobacco, liquor, motor vehicles, and telecommunications services account for 9.6 percent. People often suggest raising so-called “sin taxes”—taxes on alcohol and tobacco products—as a way to generate revenue, but as the pie chart indicates, such taxes do not amount to a significant share of revenues.

The 14 percent mineral revenues piece of the revenue pie includes severance taxes on crude oil, natural gas, coal, copper, and other hard minerals that are extracted from the ground, as well as rents and royalties from the sale or lease of mineral-producing land. About 90 percent of these mineral revenues comes from taxes collected on oil and natural gas extraction.

tax-guide-figure1

Severance taxes are a desirable revenue source because they are “exported,” meaning these taxes are paid by consumers and shareholders (whether they live in New Mexico or not), as well as oil and natural gas producers, most of which are owned by out-of-state companies. However, they are based on the value of production (e.g., the price of a barrel of oil), so changes in the market prices of these commodities can have a significant effect on the amount of revenue collected by the state.

The final two categories—“interest on investments” (13.2 percent) and “all other” (3.9 percent)—include some non-tax revenues. Interest revenue is primarily income derived from investing permanent fund revenue in the stock and bond markets. New Mexico derives an unusually large share of revenue from investments, but this revenue also rises and falls with the stock market. The “all other” category includes gaming revenue from tribal casinos as well as the fees paid on things like registering your car or visiting a state park or museum.

Technical Terms

Gross Receipts Taxes – Taxes collected on the gross receipts (total money taken in) of a business or service provider. It is usually passed along to the consumer of their goods and services.
Compensating Tax – A tax on goods that are bought out-of-state for use in New Mexico. Say, for example, you open a restaurant in New Mexico but purchase your chairs and tables in Texas. You must pay compensating tax on those purchases.
Excise Taxes – Taxes levied on specific goods, such as cigarettes, alcohol, and gasoline.
Income Taxes – Taxes paid on a resident’s personal income or a company’s profits.
Severance Taxes – Taxes paid on natural resources such as crude oil and natural gas, so named because these resources are ‘severed’ from the ground.

 

Tax Facts

Other Revenue Sources
Some other revenue sources you may be familiar with that do not go into the state general fund are:
Fuel Taxes on gasoline, diesel, and other fuels. These are specifically designated for the Department of Transportation’s use and are deposited in the state road fund, which is used to finance highway construction and maintenance, as well as debt payments for highway capital improvement bonds.
Fees are collected for services such as licensing a car or to enter a state park.
Federal Funds accounts for approximately one-third of the state’s total spending. While many agencies receive federal funding, the majority goes to the departments of Health, Human Services, Transportation, and Public Education. Federal funding also goes to higher education institutions.
Property Taxes do not support the operations of state government but are used for public infrastructure. County and city governments receive more than 46 percent of taxes imposed on property. The public schools receive about 30 percent, mostly for school construction, and the remainder goes to two-year colleges, health facilities, and special districts.

 

Spending Through the Tax Code

The state spends money both directly and indirectly. Direct spending takes the form of annual budgeting for programs and services such as education, public safety, and health care. Direct state spending is covered in the companion publication Citizen’s Guide to the New Mexico State Budget. The state also spends money indirectly by choosing to forego collecting certain tax revenues. While direct spending is done through the budgeting process, indirect spending is handled by changing the tax code.

Over the years, the Legislature has enacted many tax breaks, which are called tax expenditures. Many tax expenditures are touted as necessary for economic development because they provide a subsidy or incentive for specific businesses. Tax credits for solar panels is an example of this. Other expenditures are intended to help groups of people. The Working Families Tax Credit, which helps low-income working families, is one example.
Tax breaks almost always result in the state collecting less revenue. Lower revenue means the state will either have to cut its direct spending or it will have to raise other taxes or fees to make up the difference. Before any legislation to enact a tax break is passed, however, the state tries to estimate how much it will cost. These estimates are contained in a fiscal impact report (FIR) prepared by the Legislative Finance Committee (LFC) staff.

Once a tax break is enacted, it is a good idea to track how much it is costing the state, and whether it is having the desired outcome. This regular accounting is called a tax expenditure budget (TEB). Unfortunately, for many years the state did not track the cost and benefits of the many tax breaks that have been enacted over the years.

New Mexico lawmakers have passed bills requiring a TEB in statute, but they were all vetoed. Instead, governors have ordered the state’s Taxation and Revenue Department (TRD) to issue a TEB. When the TEB is produced by executive order, the governor can instruct the TRD to leave out any pet tax breaks he or she doesn’t want scrutinized. Because of that, New Mexico’s TEB is incomplete and does not offer enough evaluation of tax breaks.

Technical Terms

Tax Expenditure – A way the state spends money indirectly by foregoing collecting certain taxes through tax exemptions, deductions, and credits.
Tax Expenditure Budget – An accounting (usually annually) of the cumulative cost of all tax expenditures. Such a report may also determine whether the tax expenditure had the intended economic effect.
Tax Exemptions (as applied to the gross receipts tax) – Goods and services that are not taxed. For example, the state does not collect taxes on the food we buy to eat at home because it is exempt from the GRT.
Tax Deductions (as applied to the gross receipts tax) – Expenses that can be subtracted from a business’s tax return. For example, if a business rents construction equipment, the state does not collect taxes on that rental because the business has deducted the cost from their tax return.

Principles of a Good Tax System

New Mexico’s Legislative Finance Committee evaluates tax policy on five principles:

  • Adequacy
  • Efficiency
  • Equity
  • Simplicity
  • Accountability

Adequacy means that tax revenue meets state spending needs and keeps pace with inflation and population growth.

An efficient tax system, by the LFC’s definition, is one that has a broad base to avoid excess reliance on one tax. Most states rely on three sources to create balance: income, sales, and property taxes. New Mexico also collects severance taxes, so the state has four main sources of revenue, giving it a broad base.

Equity in a tax system means that everyone pays according to their ability to pay. This means taxes on low-income households should be minimized. Personal income taxes usually incorporate this ability-to-pay principle because they:

  • Adjust for family size and family type;
  • Allow deductions and credits for some family expenses like child care and health care;
  • Can include low-income wage subsidies such as the federal Earned Income Tax Credit and New Mexico’s Working Families Tax Credit (for more on refundable tax credits, see page 11); and
  • Include graduated rates.

A tax system is simple when the effort that goes into collection is minimal and it is easily understood. Every time the state enacts a tax exemption, deduction or credit, the system loses simplicity, making it more difficult to administer.

Accountability means that tax credits, exemptions, and deductions are easy to monitor and evaluate.

These five principles cover most aspects of a good tax system. However, we would add three more:

  • Stability
  • Consistency
  • Transparency

A stable tax system is one that relies more on predictable revenue sources than on sources that fluctuate. Personal income taxes are stable because they follow personal income growth. Severance taxes are less stable because they are based on the current prices of oil and natural gas, which are set at the global level.

A tax system is consistent when tax revenues grow at the same rate as state personal income. Gross receipts tax growth is the most consistent because it closely follows population growth (which also impacts the need for state services).

Transparency is what makes accountability possible. A tax system is transparent when citizens have enough information about the tax code to hold government accountable.

Tax Facts

Why the GRT is Not a Sales Tax
The GRT differs from a more traditional sales tax in a number of ways. In general, a sales tax is a tax levied by the government on the sale of products to customers. The business selling the product is simply the go-between—collecting the tax from the customer and passing it along to the state (or city or county). The GRT is a tax on the business’s total receipts—or the money it takes in. While it is generally passed along to the customer, it doesn’t have to be—but it still has to be paid to the government. Gross receipts are not the same as profits, which is the money the business makes from the transaction minus the deduction of allowable expenses.

Measuring Tax Fairness

A state tax system can either be regressive, proportional or progressive.

Sales and excise taxes tend to be regressive, meaning those with the lowest incomes pay the highest share of their income in these taxes. That is because the lower a person’s income, the higher the share that must be spent on day-to-day necessities—such as gas, utilities, and non-food groceries—most of which are taxed. This means they spend a greater proportion of their income on sales taxes than do upper-income people, who can save or invest some of their earnings because they do not need to spend it all to make ends meet.

A proportional system in one in which everyone pays the same percentage of their income in taxes. This may sound like the most equitable option, but it does not take into account one’s ability to pay or minimize taxes on low-income households.

Income taxes are generally progressive, meaning those who earn the least pay the lowest rates, with rates increasing as income increases. The federal income tax was designed this way to help make up for the fact that state and local taxes tend to be regressive.

Technical Terms

Regressive Taxes – Those with lower incomes pay a higher percentage of their income in tax than do those with higher incomes.
Proportional Taxes – Everyone pays the same percentage of their income in tax.
Progressive Taxes – Those with lower incomes pay a smaller percentage of their income in tax than do those with higher incomes.

Taxing Poverty

Most people agree that the poor shouldn’t pay a higher percentage of their income in taxes than the rich. However, the truth is that poor people pay a much higher share of their income in taxes.

When we look at taxes as a share of income, the ideas of regressivity and progressivity become clearer. Figure II (below) illustrates what percentage of their income non-elderly New Mexicans pay in taxes. The chart is organized by income levels, from the lowest 20 percent to the highest 1 percent, in order to show how the impact of taxes varies depending on one’s income.

The light orange bars show the total share of income paid in state and local taxes. The bars decrease as income increases—meaning the overall system is regressive. The colored bars within the light orange bars show how each individual tax contributes to the overall rate. As the blue bars indicate, sales and excise taxes are the most regressive—hitting the lowest 20 percent the hardest. The same is true for property taxes (the yellow bars), which doesn’t just hit homeowners, because it is also passed along to renters. The opposite trend can be observed for income taxes (the green bars) because these taxes are progressive. The lowest 20 percent of earners receive an income tax credit (shown by the green bars that dip below the 0 percent line) and as the amount earned increases, the percentage paid to income taxes also increases (except for the top 1 percent, where it decreases slightly).

In addition, there is a federal offset (the dark orange bars). State income taxes paid are deducted from the amount owed in federal income taxes, thereby decreasing the amount of federal income taxes due. The higher the income group, the more valuable the offset.
Overall, Figure II shows that income earners in the lowest 20 percent pay nearly 11 percent of their income in taxes, while the top 1 percent pays less than 5 percent—meaning the tax rate paid by the poorest New Mexicans is more than twice the tax rate paid by the richest.

tax-guide-figure2

Refundable Tax Credits

One progressive aspect of New Mexico’s income tax is the existence of four refundable tax credits for very low-income New Mexicans:

  • Low-Income Comprehensive Tax Rebate (LICTR);
  • Property Tax Rebate for seniors;
  • Child Care Credit for low-income working parents; and
  • Working Families Tax Credit (WFTC).

Refundable tax credits help low-income families by reducing their overall tax bill if they owe taxes or refunding them money they’ve already spent (for example, on child care) if they do not owe taxes. The WFTC, a state-level Earned Income Tax Credit (EITC), rewards work because the credit amount is based on income earned. Unfortunately, millions of dollars in federal and state refundable tax credits go unclaimed every year by New Mexicans1 because they either do not file tax returns or they (or their tax preparer) are unaware of the credits.

Tax Cuts and “Job Creators”

A Less Adequate, Equitable and Stable System

In 2003, at then-Governor Richardson’s request, the New Mexico Legislature cut the personal income tax rate for the top income earners by almost half—from 8.2 percent to 4.9 percent. New Mexicans earning the median income ($29,001–$45,000) received a small cut. Those earning the least—the bottom 40 percent of tax filers—received no benefit at all.

As Figure III (below) shows, this has made state income taxes considerably less progressive. The tax rate climbs rapidly in the lower-income brackets ($0 to $30,000), then begins to level out at about $70,000, and is completely flat by the time it reaches $250,000. To be truly progressive, tax rates should climb more rapidly in the highest income levels, not at the lowest. In other words, the curve below should start out flat and rise most rapidly at the end of the income scale instead of the beginning.

tax-guide-figure3

Also in 2003, those receiving capital gains income were given a big break. Capital gains is income realized when something of value—stocks, bonds, real estate, etc.—is sold at a profit. Because it does not come from wages or salaries, capital gains is called “unearned income” by economists. New Mexico allows those with capital gains to deduct half of that income from their state taxes. This deduction overwhelmingly goes to the highest-income earners.

In 2013, without an FIR and with very little debate, the Legislature passed an omnibus tax bill. Two of the most expensive provisions in the omnibus bill were changes to the state’s corporate income tax. The bill reduced the overall CIT rate and it also essentially eliminated CIT for the manufacturers operating in the state. Like the PIT cuts before it, the public was told that the 2013 bill would encourage job growth. There is no evidence that these tax cuts produced jobs. What the cuts did do, however, was make the state more reliant on revenue from other sources—namely severance taxes, which are not a particularly consistent revenue source, as we have seen. In fact, when oil and natural gas prices fell sharply in early 2016, the state was unable to bring in enough revenue to cover the programs and services that had already been budgeted. The Legislature had to meet in a special session in October 2016 to make sharp spending cuts to both the FY16 and FY17 budgets. As revenue collections continued to lag, more cuts had to be made to the FY17 budget during the 2017 regular legislative session.

Technical Terms

Fiscal Year – The revenue and budget year for the state. New Mexico’s fiscal year starts on July 1 and ends the following June 30. The fiscal year is named for the calendar year in which the fiscal year ends. For example, fiscal year 2017 (which began July 1, 2016) ends on June 30, 2017. Fiscal year 2017 is abbreviated as FY17.
Omnibus bill – A bill consisting of many different smaller bills.

Those Elusive ‘Job Creators’

Over the past 40 years, Americans have been told that tax cuts for the wealthy will create jobs. We were also told that the new jobs created by these tax cuts would generate enough new tax revenue that the cuts would “pay for themselves.” While tax cuts for the so-called “job creators” can spur job growth, they have not been proven to pay for themselves,2 so that means states lose money on them.

Tax Facts

What Business Wants
Business values a skilled workforce more than tax cuts because:
Labor = 40% of business costs.
State taxes = 1% of business costs.

When tax cuts result in spending cuts, both public- and private-sector jobs are lost. Cities and states not only cut back on employees, they also cut back on contracts with the private businesses, vendors, and non-profits that provide services. The jobs lost can range from teachers and technical advisors to health care providers. In short, a million dollars spent providing education or health care creates far more jobs than a million dollars sent back to shareholders or high-income consumers in the form of tax cuts. Leading economists say that cutting public-sector jobs in order to pay for private-sector tax breaks does more harm to the economy than good.3

Tax cuts for businesses are also said to encourage job growth by luring new companies to the state. While no company will turn down a tax incentive, research shows that business owners weigh a very broad range of factors that are associated with the quality of living—such as the quality of the public education system and the local workforce, proximity to highway, rail, and airline routes, and even the weather—when considering new business locations.

In the last decade, New Mexico has cut personal and corporate taxes by billions of dollars in an attempt to lure companies to the state. Our job growth rate, however, continues to be sluggish.

Conclusion

Most government services and programs are paid for by taxes, as is the infrastructure that makes our way of life and modern economy possible. How we collect taxes says a great deal about our values and priorities—whether we want a progressive tax system that allows low-income families to pay less, or whether we think everyone should pay the same rate no matter their income level.

Because of our broad-based gross receipts tax, New Mexico’s tax system has always leaned rather heavily on our low-income families. The income tax cuts of 2003 and corporate tax cuts of 2013 made our system even less progressive and also significantly decreased the state’s revenue.

Endnotes

1. “The Earned Income Tax Credit—A Fact Sheet,” Center on Budget and Policy Priorities, http://www.cbpp.org/eitc-partnership/eitcfactsheet.htm
2. “Tax Cuts: Myths and Realities,” Center on Budget and Policy Priorities, Washington, DC, Revised May 9, 2008; http://www.cbpp.org/cms/?fa=view&id=692
3. “The Ultimate Burden Of The Tax Cuts: Once the Tax Cuts are Paid for, Low– and Middle–Income Households Likely To Be Net Losers, on Average,” William G. Gale, Peter R. Orszag, and Isaac Shapiro, Center on Budget and Policy Priorities, Washington, DC, 2004; http://www.cbpp.org/cms/index.cfm?fa=view&id=1971

Download this citizen’s guide (updated Sept. 2017; 16 pages pdf)
Link to the Citizen’s Guide to the New Mexico State Budget
Link to the Advocate’s Guide to the New Mexico State Budget
Link to the Citizen’s Guide to Legislative Advocacy

The Fiscal Policy Project, a program of New Mexico Voices for Children, is made possible by grants from the Annie E. Casey Foundation, the McCune Charitable Foundation, and the W.K. Kellogg Foundation.

Try Spelling Regret without GRT

The Martinez Administration’s “37” Tax Cuts

RPachecoby Raphael Pacheco, MBA
March 22, 2017

As the 2017 regular legislative session ends, New Mexico finds itself in familiar territory—with no money in a slow-moving economy. The same tired rhetoric of no tax increases—a pledge made by Governor Susana Martinez since she has taken office—has led to deep cuts in essential services like education, public safety, and health care.

Because we often hear the administration touting the 37 tax cuts made since Governor Richardson left office in 2011, obviously the executive believes we can cut our way to prosperity. But in reality, these cuts helped put our state in the red.

All tax cuts serve a fundamental purpose—to change behavior. For example, if you were able to deduct all purchases you made on pizza from your personal income taxes every year, you would probably eat a lot more pizza. That logic is valid for a tax cut on jet fuel enacted by the Martinez administration in 2011. By reducing taxes on jet fuel, it is hoped that more jet fuel is purchased in New Mexico, thus resulting in an economic boost to the airline industries. This isn’t the problem.

The problem occurs when the underlying assumption for a behavior change is incorrect. In 2014, the Martinez administration passed a tax deduction for the sale of infusion therapy services. Infusion therapy is the practice of administering medication through needles or catheters. What behavior was this tax cut aimed at changing? Not the behavior of the service providers. They weren’t going to leave the state because the cost of doing business was too high. These services were going to stay in New Mexico because the demand for them is high. It won’t change the behavior of consumers because these are likely life-saving services. And, due to an aging population, the Affordable Care Act, and expanded access to Medicaid, more people need and can afford these services.

But even if the underlying assumption is correct, at least on paper, a different problem may occur. Going back to the jet fuel example: in the five years since the tax cut was implemented, it is unclear if the deduction is having any influence on purchases of jet fuel in New Mexico, according to the 2016 tax expenditure report. So if the tax cuts are not resulting in the intended outcome motivated by the assumption, or the underlying assumption was just flat incorrect, then they are not working. Put simply, if tax cuts are ineffective, we should not still have them in the tax code.

This brings me to another problem. If these tax cuts have minimal impacts on job creation and industry growth while simultaneously leaving New Mexico in a bigger fiscal hole than we were in before, why do we keep them? When will we change strategies?

Death by 37 (tax) cuts

A blog by Capitol Report New Mexico outlined the few dozen tax cuts the governor has claimed to have made during her tenure. I wanted to dig deeper into these tax cuts to see how much they cost and if they benefited the state. After several hours of poring through fiscal impact reports and legislation, several hundred milligrams of caffeine, and about five Excel spreadsheets later, I now present to you the 37 (29 is probably more accurate) tax cuts provided by the Martinez administration.

Before diving in, I ask the reader to realize that, for me, researching tax policy is best described by the blue line in Figure I. While, for you, interest may by graphed more like the orange line.

37 tax cuts-figure-I

Frankly, the phrase “getting into the weeds” doesn’t do this research justice. So to spare some of your time and sanity, I won’t go into detail for every tax cut the administration claims as their own. If you’re interested in learning more about any of these cuts, however, please feel free to email me.

Let’s dig in!

2011 Regular Legislative Session

HB 273 Small Business Tax Credit Eligibility Period cost: $761,000

Do you own a small business? If not, you didn’t benefit from this cut that ended in the summer of 2015. This bill extended the eligibility period for the Research and Development Small Business Tax Credit. Not a large number of taxpayers, however, were eligible for this credit. It’s simply targeted legislation that helps a select few, a pattern that will continue as we work our way through the years.

HB 440 Advanced Energy Tax Deduction for Some Leases cost: $44.2 million

Although the current administration claims this deduction as their own, HB 440 was merely an extension of a tax cut enacted by the Richardson administration—the Advanced Energy Gross Receipts Tax Deduction for the sale of “equipment for an advanced electrical generation facility.” If you’re asking yourself what that means for you and me, the answer is “not much.” The Martinez extension added “leases” in addition to sales and purchases of eligible electrical equipment. And for most New Mexicans this is much ado about nothing.

HB 523 & SB 179 Locomotive Fuel Gross Receipts Deduction cost: $19.5 million

Remember this one? This was dubbed the “Union Pacific” bill by many because it made locomotive fuel tax exempt, contingent upon Union Pacific opening a port in Doña Ana County, specifically Santa Teresa. Union Pacific has been cited as saying that the bill allowed for the construction of the facility, so we’ll take their word for it and give the administration the benefit of the special-interest doubt on this one.

SB 84 Jet Fuel Gross Receipts cost: $4.4 million

This is the jet fuel tax reduction mentioned before for fuel prepared and sold for use in turboprop or jet-type engines. And we still don’t know if it helped the airline industry in New Mexico.

SB 282 Tax Liability for Certain Physicians cost: $275,000

Are you a clinical oncologist in rural New Mexico who treats patients in cancer clinical trials? You may start to get the pattern by now, but you almost certainly didn’t get the tax cut.

Will the remaining years be any better? Keep in mind we’re only a fifth of the way through!

2012 Regular Session

HB 10 Veteran Employment Tax Credit cost: $12 million

This bill allowed business owners in New Mexico to receive a $1,000 tax credit for each veteran they hire. This credit brings up an interesting problem. By creating a tax preference for hiring veterans, it places non-veteran job applicants at a disadvantage. Additionally, there is no consensus on whether veterans have significantly different unemployment rates than other groups of men, for example, in those age ranges. To illustrate, the unemployment rate for Gulf War-era veterans is 4.8 percent which is only slightly higher than the nationwide average for men aged 35 to 44.[i] For additional comparison, the state’s unemployment rate is 6.7 percent.

HB 116 Electric Conversion Facility Gross Receipts cost: unknown

This law provided a tax exemption for the electricity that is used during the production and transmission of electricity. Simply put, it’s a tax break for getting power from point A (like a power grid) to point B (like homes or businesses). The purpose of the exemption was to encourage the building of power lines and to provide an incentive for an electricity exchange to be located in New Mexico. (Although no fiscal impact report was done for this bill, it’s estimated[ii] that for an energy company with sales of $500 million, the state would lose $29 million per year.) Despite the cost, this puts us in line with other state’s tax structures.

HB 184/256 Construction Service for Gross Receipts & Manufacturing Property Gross Receipts cost: almost $200 million

These tax deductions are the most glaring of all. Costing the state almost $200 million in lost revenue since their creation, the two deductions are directly counter to the Legislative Finance Committee tax policy principle of adequacy, which means it will cost more to implement this tax change than it’s worth.

The first of these, the Manufacturing Gross Receipts Deduction, allows the deduction of “property consumed in the manufacturing process”—or the cost of the stuff used in the making of other stuff. This would include the cost of utilities, for example. The intention of this legislation was to reduce pyramiding. This means taxes charged on business-to-business sales that become embedded as part of the cost and thus making the final product more expensive.

The second, the Construction Gross Receipts Deduction, makes it easier for a construction worker to rent equipment without having to pay tax on it.

It was hoped that these would create more jobs in the manufacturing and construction industries. Although job creation is not included in the impact analysis, when the deductions went into effect in 2013, there were 28,800 workers in the manufacturing industry in New Mexico; that number is now at 26,500—a decrease of 8 percent. Construction, however, was at 40,100 workers at the beginning of 2013 and that number is now 45,200—an increase of 12.7 percent. Together, we have a net gain of 2,800 jobs in these two industries over four years. So, essentially, the state spent $70,000 for each of these jobs, which is likely more than these jobs pay. This assumes, however, that all jobs can be attributed to the exemption—clearly, employment in this industry can be attributed to other factors not related to this deduction as well.

SB 32 Temporary Unemployment Fund Contributions cost: $160 million

This bill changed the amount of money employers had to pay into the unemployment insurance trust fund, which compromises the fund’s solvency. Will the fund be solvent for the next economic down-turn? I’m skeptical. It’s also not a tax cut so much as an insurance rate cut.

2013 Regular Session

HB 106 Increase Value of City Property for Lease cost: negligible

This bill raises the threshold from $25,000 to $250,000 for the sale of municipally owned facilities or real property without a referendum (a vote by the electorate). It might save some time, but it’s not a tax cut.

HB 641 Film Production Tax Credit Changes cost: $68.8 million

Truly a Barnum & Bailey bill, this bill made several changes to the tax code and not to just the film industry. HB 641 did seven things but here are the worst:

  1. Lowered the corporate income tax rate over five years;
  2. Allowed manufacturing corporations to not pay any income tax; and
  3. Allowed municipalities and counties to increase their local tax rates.

Let’s see here: a cut for corporations, another cut for corporations, and a tax hike for the rest of us. You and I foot the bill at almost $69 million. Sounds fair.

SB 81 Liquor Tax Microbrew Volume Limit cost: $2.3 million

Tax bills about beer? Finally! Truly a bill after my own heart, this amended the language and definition of what constitutes a microbrewer. It now means a brewer who produces fewer than 15,000 barrels of beer annually, whereas the threshold was less than 5,000 barrels before. This allowed more brewers to qualify for the credit, as well as lowered the tax rate of microbrewed beer from 41 cents to a mere 8 cents (for the first 10,000 gallons). In New Mexico we have enjoyed the prosperity of craft microbreweries for a while now. As the market has experienced a massive increase in patronage as millennials continue to age and imbibe, tax cuts for burgeoning industries are often sound tax policy. But an 80 percent tax decrease on brews produced—do microbrewers really need that much help?

SB 116 Liquor Tax Small Winegrowers Volume Limit cost: $1.8 million

If beer isn’t your thing, perhaps wine is. This bill increased the production cap for small winegrowers as well as cut the tax rate for each liter of wine produced within in that new range from 45 cents to 30 cents. Now again, there is nothing wrong with cutting taxes to spur industry growth. Please keep in mind, however, this is a tax cut for winegrowers, not the people who drink wine. And much like the microbrewery bill before, this cut decreased state revenues, which in the end means less access to vital services for you and me.

SB 160 New Biodiesel Definitions cost: $2.3 million

There are exactly two producers in New Mexico that make the biofuel that falls under this definition: Rio Valley Biofuels and Renewable Energy Group, located in Anthony and Clovis, respectively. SB 160 is a tax cut tailored for these producers. At the time of the analysis a third producer existed but had not yet begun production.

2014 Regular Session

HB 14 Aircraft Parts & Maintenance Gross Receipts cost: $1.6 million

This bill provides a tax deduction for selling aircraft parts or maintenance services for aircraft or aircraft parts. A cut for aviation but not for me and you.

SB 88 Infusion Therapy & Medical Supply Gross Receipts cost: $8.9 million

We’ve already looked at this tax deduction for the sale of infusion therapy so there’s not much more to say except that when the legislation was enacted there were 40 infusion therapy equipment suppliers who filed gross receipts tax returns which suggests that this is an industry likely to thrive without special treatment.

HB 32 Dialysis Facility Service Gross Receipts cost: $3.7 million

A similar type of legislation was also passed in 2014 that provided a tax deduction for health services provided by a dialysis facility to Medicare beneficiaries. About 3,000 dialysis patients reside in New Mexico so this is a deduction that benefits only a few. The real problem is that both this deduction and the infusion therapy deduction exist in markets that are driven by demand, meaning they will likely continue to succeed as long as people need the services. These kinds of tax deductions should only be used to encourage the supply side of the equation (such as beer and wine consumption).

2015 Regular Session

SB 279 Sustainable Building Tax Credits cost: $10 million

This bill was enacted in 2013 and amended in 2015. The credit was designed to be used for the construction and renovation of either commercial or residential buildings that met the “LEED green build rating system.” Investing in green infrastructure is something everyone can get behind and hopefully this credit will actually serve its purpose for constructing higher quality buildings and encouraging energy efficiency.

SB 506 Disabled Veteran Property Tax Exemptions cost: negligible

This legislation enables disabled veterans to maintain their exemption on property tax even if they change their residence. This does not qualify as a tax cut and the fiscal impact is negligible.

2015 Special Session

The 2015 Special Legislative Session resulted in a tax package that contained a lot of moving parts but little in the way of tax cuts for New Mexico’s hard-working families.

HB 2 Angel Investment Tax Credit cost: $1.3 million

A tax cut for investors. The term “angel” refers to an individual who provides capital for start-up business costs in exchange for some equity in the business or convertible debt.

HB 2 Singles Sales for CIT and Border Zone Trade for GRT combined cost: about $200,000

With a combined loss of a little over $200,000 to state revenues—very little money in the scheme of things—it is difficult qualifying these as additional tax cuts.

HB 2 US Department of Defense Energy GRT cost: $9.3 million

The Air Force Research Laboratory (AFRL) at Kirtland Air Force Base is the primary recipient of this tax break. In February 2015, UNM’s Bureau of Business and Economic Research concluded that the economic impact of the AFRL was $536 million, so a $9.3 million impact seems relatively small and justified if it keeps them in New Mexico.

HB 2 Tech Jobs and R&D Tax Credit cost: $5.2 million

The stated purpose of this legislation is to provide a favorable tax climate for technology-based businesses engaging in research, development, and experimentation to promote increased employment and higher wages in these fields. Recent data show that 54,577 New Mexicans were employed in the Professional, Scientific, and Technical Service Industry in New Mexico in 2015 with an average wage of $1,445 a week.

Where does that leave us in 2017?

The tax cuts heralded by Susana Martinez have cost the state more than $500 million during her stay as governor of New Mexico (see Figure II). Frankly, the 37 cuts figure the Martinez administration often references is inflated and misleading. But regardless if the number is 1, 29, 37, or 500 million, when will the special interest tax breaks end?

37 tax cuts-figure-II

Did the tax cuts have their hoped-for job-creating impact? That’s hard to say, but I leave you with Figure III so you may make your own conclusions (and, no, the state’s unemployment rate hasn’t gotten better since 2016. In fact, in January of 2017 it was 6.7 percent—the highest in the nation).

37 tax cuts-figure-III

Dear reader, whether good or bad, for you or not, tax cuts that are not offset with new revenue are irresponsible and regrettable at best and off-target and unsustainable at worst. We must restore lost revenue to the state if we are to survive another fiscal year. The first rule about getting out of a hole if you find yourself in one, is to stop digging. A hole filled with half a billion one-dollar bills is about 63 cubic meters by volume. It’s time to stop digging.

[i] https://www.bls.gov/news.release/vet.t01.htm, table 1 employment status of veteran by veteran status, May 2016
[ii] Fiscal Impact Report, Electric Conversion Facility Gross Receipts, Legislative Finance Committee, February 2012

Raphael Pacheco, MBA, is a Research and Policy Analyst and the State Priorities Partnership Fellow for NM Voices for Children.

How revenue from HB 202 could be invested in New Mexico

Download this infographic (Feb. 2017; pdf)
HB 202 factsheet
Download this infographic (Feb. 2017; pdf)

NM’s Working Families Tax Credit

Improving the Credit’s Benefits to the State, Its Businesses, and Its People

tax-returns
by Amber Wallin, MPA
Download this report (Jan. 2017; 16 pages; pdf)
Download just the appendix (6 pages; pdf)
Link to the fact sheet

Our economy is strongest when people have money to spend and, while the rest of the nation is recovering from the recession, New Mexico is still struggling to attract good-paying jobs. When people work full time and still don’t earn enough money to cover the basics, our economy is not at its healthiest. Tax credits for low- and moderate-income working families are one common-sense way to spur economic activity and put money in the hands of consumers who will spend it, particularly when wages are low.

In New Mexico, the Working Families Tax Credit is one of the most sensible parts of our tax code: it encourages work, helps to raise hard-working families out of poverty, and benefits almost 300,000 children, while also pumping millions of dollars back into local communities. Increasing the credit is a smart investment in New Mexico’s businesses, working families, and future.

The History of the Credits

The Working Families Tax Credit (WFTC) is the state’s equivalent of the federal Earned Income Tax Credit (EITC). Its eligibility levels and amounts are based directly on the EITC, and it increases, complements, and leverages the EITC’s ability to directly benefit New Mexico. The purpose of the EITC is to help offset more regressive taxes, reduce poverty, and incentivize employment for low-income workers. The EITC was first passed with bipartisan support under President Gerald Ford in 1975. In 1986, the EITC was indexed to rise with inflation under President Ronald Reagan who called the program “the best anti-poverty, the best pro-family, the best job-creation measure to come out of Congress.”1

Since its passage, the EITC has been strongly supported by both Republican and Democratic lawmakers on both the national and state level, and 26 states plus the District of Columbia have modeled state credits after the EITC in order to help offset regressive state taxes for low-income workers while also improving conditions for families in their states and encouraging work among lower-income earners (see Appendix A, for list of states with EITC-based credits). New Mexico enacted the WFTC in 2007 at 8 percent of the EITC and raised it to 10 percent of the EITC in 2008.

How the Credits Work

Eligibility for both credits depend on a filer’s earned income, marital status, and the number of dependent children (see Figure I). For tax year 2015, working parents who had incomes of up to $39,131 (for a single parent with one child) and $53,267 (for a married couple with three or more children) could receive the credits. Workers with no children had to earn no more than $14,820 (or $20,330, if married and filing jointly) to qualify for credits. The value of the refunds ranged between maximums of $503 (with no children) and $6,242 (with three or more children) for the EITC and $50 to $620 for the WFTC. The refund amounts increase as earned income increases until they reach a maximum level, at which point they plateau and then phase out as higher incomes lift families out of poverty.

EITC-WFTC-FigureI

Who Claims the Credits

In the 2013 tax year, the most recent year for which data are available, more than 212,000 New Mexico individuals and families (or 26 percent of the tax returns filed in the state) claimed the EITC and the WFTC.

That year, New Mexico’s working families received more than $513 million from the EITC and nearly $51 million from the WFTC. The average credit amount for each New Mexico tax return with the credits was about $2,700 when the two refunds are combined.2 Every legislative district and county in New Mexico benefits from the credits (see Appendices B, C, and D, for EITC and WFTC amounts and percent of claimants by county, state House and Senate districts).

The majority of the more than 212,000 working New Mexicans who claim the EITC and WFTC every year are racial or ethnic minorities; 52 percent are Hispanic, nearly 16 percent are Native American, and 29 percent are non-Hispanic White (see Figure II). These filers have a median income of $14,058.3 The credits help most of these workers through tough―but temporary―economic troubles, such as a job loss or the birth of a child. In fact, three out of five workers claim the credits for only one or two years4 (See Figure III).

EITC-WFTC-FigureII-III

The vast majority of those who claim the EITC and WFTC are working, low-income parents who support the nearly 300,000 children living in the households that benefit from the credits. Only a tiny percentage are adults without dependent children, and their incomes must be very low for them to qualify. That most of those who benefit are parents and children is especially important, because according to the national KIDS COUNT program, New Mexico ranks 48th among the states in family economic well-being, and 49th in overall child well-being.5 More than 96 percent of the money returned to taxpayers via the EITC and WFTC goes to working families with children―14,000 of which are families headed by active duty military or by military veterans who are making their way back into the New Mexico workforce.6 The income boost from the credits helps families afford necessities like food, housing, and child care, especially in the month following when they receive their refund. It is estimated that 95 percent of EITC and WFTC recipients also use part the credits to pay off debt or make major car repairs.7

As a group, those who claim the EITC and WFTC pay a large share of their incomes in taxes. In fact, in addition to the federal payroll taxes they pay, New Mexico’s lowest-income households pay a larger share of their income in state and local taxes than the households in every other income group. Those making less than $17,000 a year pay more than 10 percent of their incomes in state and local taxes. Meanwhile, New Mexicans who make more than $340,000 pay less than 5 percent of their incomes in those same taxes8 (see Figure IV). This huge disparity exists even after the current value of the EITC and WFTC are taken into account.

EITC-WFTC-FigureIV

Many types of occupations and industries are represented among EITC/WFTC-eligible tax claimants. The occupations that have the highest shares of EITC/WFTC filers are office and administrative work, sales, and construction and extraction (see Figure V). The health care, retail trade, accommodation and food service, and construction sectors are the industries with the highest shares of workers who claim the credits (see Figure VI). Tax credits for workers in these industries help make up for what are often very low wages and, in doing so, directly help support the businesses in these industries.

EITC-WFTC-FigureVII

Both highly educated New Mexicans and those with limited educations benefit substantially from the EITC and the WFTC. While half of filers have a high school diploma or less, half have at least some college, and 12 percent of claimants have a bachelor’s degree or higher (see Figure VII).

Putting the Credits to Work for New Mexico

The Credits Benefit New Mexico Families

EITC-WFTC-FigureV-VINew Mexico has the second highest overall poverty rate (20 percent) and second highest child poverty rate (29 percent) in the nation,9 but our high poverty rates would be even worse without the EITC and WFTC. Without these credits, nearly 40,000 more New Mexico families—including 20,000 more children—would live in poverty.10

New Mexico’s high poverty rates among children and the overall population extend to workers and their families as well. The state is ranked worst in the nation in terms of poverty among the employed, among people who work full-time year-round, and among people who have a bachelor’s degree or higher.11 We also have one of the highest percentages in the nation of workers in low-wage jobs, so it is not surprising that New Mexico has the highest percentage (17 percent) of families that are working but still living below the poverty line, and the highest percentage (42 percent) of working families that are low-income (below 200 percent of the federal poverty level). Because so many of our working families are poor or living in poverty, we also have the worst rankings in the nation of the percent of children in working families that are poor or living in poverty.12

Of these low-income working families, 41 percent are headed by working mothers. This is important because working mothers who are low-income are often employed in retail and service-sector jobs that pay low wages, limit hours, and fail to provide benefits such as health insurance and paid sick leave that are crucial to the health and success of families and children.13

New Mexico also has one of the highest rates of income inequality in the nation—meaning there is a large gap between what the lowest-income New Mexicans earn and what the highest-income New Mexicans earn.14 Income inequality puts our economy out of balance in part because too much income is concentrated into too few hands where it is less likely to be spent. Growing income inequality is especially destructive in New Mexico because while the rest of the nation has already bounced back from the Great Recession of 2007-2009, New Mexico’s recovery has largely flat-lined for most workers. Economic recoveries happen more quickly when recoveries in income and employment are more broadly shared and spread across all income levels. However, in contrast with historical economic recoveries, income and employment recoveries of the last recession have taken longer to reach low- and middle-income earners, especially in New Mexico. As the gap between the wealthiest and the poorest gets bigger, gains—including recession recovery gains—go very disproportionately to the richest. Tax credits like the EITC and WFTC that target benefits to low-income workers give low-income groups a hand-up while helping to limit the growing gap in wealth inequality.

The EITC and WFTC not only help increase workers’ incomes, but they also help low-income families continue to participate in the workforce because they help pay for necessities like child care, transportation, and education or job training programs. This is good for businesses because workers who can pay for these basic needs are more reliable employees. Families with very low wages see higher refunds as their incomes rise, which encourages them to work more hours. Extensive research shows that the EITC has been successful at encouraging and increasing work, especially among single parents, and particularly among single mothers.15 Increased work and earnings among low-income families has the effect, in turn, of reducing dependence on public assistance and shrinking Temporary Assistance for Needy Families (TANF, the program formerly known as welfare) caseloads. Workers who receive credits like the EITC and WFTC also boost their Social Security earnings and retirement benefits, which can help reduce the incidence or severity of poverty in old age.16 Research shows that the EITC increases employment and reduces the need for public assistance across generations.

The Credits Benefit New Mexico Kids

The WFTC is a relatively small investment on the part of the state that can make a big difference in the lives of New Mexico’s working families and their children. The effects start early and are long-lasting. Increases in EITCs and the creation of state-based EITCs have been linked with earlier prenatal care, an increased likelihood for prenatal care, lowered maternal stress, decreased smoking and drinking during pregnancy, and improved infant birthweight.17 The extra income helps families meet their kids’ basic needs, which in turn, improves children’s chances of success. Children in EITC families have better health outcomes,18 perform better on math and reading tests, and are more likely to graduate high school and go to college than children in low-income families that do not receive the EITC.19

Because higher incomes from refundable tax credits are associated with better health, more education, and higher skills, children in EITC/WFTC families are more likely to work and earn more as adults.20 In fact, children from EITC families, on average, go on to earn 17 percent more when they reach adulthood then do children from low-income families who do not receive the EITC.21 Research finds that progressive state income tax provisions—including state-based EITCs like the WFTC—are linked to increased intergenerational income mobility.22 This relationship strengthens with the size of the state-based EITC, and in states with larger credits, low-income children are even more likely to move up the income ladder over time.23

The Credits Benefit New Mexico Businesses

The EITC and WFTC are also good for business because they are good for the state’s economy. Last year alone, New Mexico’s low-wage workers received more than $560 million from the EITC and WFTC—much of which was pumped right back into the economy through rent payments, purchases of cars, groceries and other household necessities, and to pay for child care. Research shows that EITC households spend their credits quickly and locally, and that local economies benefit as a result. Economists categorize economic impacts of injections of money into an economy (in this case, federal EITC money into New Mexico’s economy) as the sum of direct impacts (EITC recipients spending their refunds), indirect impacts (businesses spending more in response to EITC spending at those businesses), and induced impacts (changes in spending patterns caused by direct and indirect impacts). Together these economic impacts are referred to as the “multiplier” effect of a program.24 The EITC is widely known to have a very strong multiplier effect. In fact, it is estimated that for every $1.00 claimed from the EITC, $1.50 to $2.00 is generated in local economic activity.25 That means the EITC alone is responsible for somewhere between $770 million and more than $1 billion in economic activity in New Mexico each year. This economic activity is important in metro areas, but may be especially crucial in rural areas of New Mexico (see Appendix B for EITC amounts and percent of claimants by county).

The EITC has other economic benefits as well. Though it is widely regarded as one of our nation’s most successful anti-poverty programs,26 the EITC was originally intended to primarily act as an economic stimulus.27 Over time, many governments have pushed for expanded EITC participation in their states for this very reason—to increase spending in their economies.28 The EITC and WFTC also benefit employers by enabling workers to better support their families even on meager wages. It has been estimated that as much as 36 cents of every dollar of an EITC credit directly benefits employers by lowering the cost of labor.29 This trend is likely to hold up in New Mexico, where we not only have one of the highest rates of working poor and working low-income families in the nation (as noted above), but also one of the highest rates—34 percent—of employment within occupations whose median annual pay is below the poverty threshold for a family of four.30

The Truth About Overpayments and Errors

In recent years, potential issues about EITC overpayments have been discussed. However, the debate around EITC errors is often misleading and ignores three important points:

1. The overpayment rate is overstated and based on older data.

• More than 40 percent of claims counted as “overpayments” were determined to be valid on further review.31
• The overpayment rate does not fully account for corresponding underpayments. For example, if a father mistakenly claims an EITC for a child that lives with the mother, the full amount is counted as an overpayment but the amount unclaimed by the eligible mother is not taken into account.
• Overpayment estimates are based on 2009 data, and do not reflect the significant additional enforcement measures the IRS has implemented since then.

2. Most EITC overpayments are due to honest mistakes, not intentional fraud.

• IRS studies acknowledge the majority of errors are unintentional32 and stem from the combination of the complexity of the EITC’s rules and the complexity of many family arrangements.33
• Most EITC errors occur on commercially prepared returns,34 and commercial tax preparers, not individual filers, are responsible for 75 percent of the value of EITC overpayments.35

3. EITC errors cost significantly less than business tax noncompliance.

• A 2012 IRS study found that 56 percent of business income went unreported in 2006. This cost $122 billion in uncollected revenue—more than ten times the size of estimated EITC overpayments that year.36
• The EITC rate of noncompliance is substantially lower than the rate in a number of other parts of the tax code, and accounts for a very small share (less than 3 percent) of the estimated $450 billion tax compliance gap.

IRS Actions to Reduce EITC Overpayments37

• More than 80 percent of EITC claims are now filed electronically, better enabling the IRS to identify questionable EITC claims before paying them.
• A powerful IRS database identifies questionable EITC claims, targeting nearly 500,000 claims annually for examination.
• The IRS is implementing rules to require preparers to register and pass a competency exam that promises to be a major step forward.
• In 2013, the IRS identified 7,000 preparers with high error rates in the EITC claims they filed. It carried out a range of interventions with these preparers before and during the 2013 filing season, including educational visits by IRS agents. Overall, this strategy alone averted an estimated $590 million in erroneous claims, according to the IRS.

Policy Recommendations

Evidence that New Mexico’s Working Families Tax Credit helps working families and spurs the economy is abundant. However, the credit could do even more with some improvements.

• Increase the value of the WFTC
At 10 percent, New Mexico’s WFTC is below the national average among states that have a similar EITC-based tax credit (see Appendix A). Lawmakers should increase the credit from 10 percent to at least 15 percent of the federal Earned Income Tax Credit. Raising the credit to 15 percent of the EITC would mean investing $26 million more in our economy and our hard-working, low-income families. This practical investment will make a big difference for New Mexico families struggling to get by on low wages.

• Expand outreach efforts and tax preparation assistance
One in five eligible workers in New Mexico miss out on the EITC and WFTC, either because they don’t claim it when filing, or they don’t file a return. Tax assistance programs—such as the United Way and CNM’s Tax Help New Mexico program—that provide free (and bilingual) tax preparation for low-income New Mexicans are great models for tax preparation outreach. Lawmakers should expand outreach efforts like these and support free or low-cost tax preparation assistance in order to maximize the benefit of the credit. Expanding access to volunteer tax preparation services and free online tax filing would preserve more of the credits’ values for those filers that might otherwise face significant tax preparation fees or be pressured to buy costly refund products that eat up a large part of the credits, blunting their otherwise positive impacts. Additionally, due to the proven economic benefits of the EITC, expanding participation among eligible filers would increase transfer payments and benefit New Mexico’s economy.

• Restrict refund anticipation loans and checks
Another good reason for increasing access to free or low-cost tax preparation for low-income New Mexicans is that it keeps them from being preyed upon by commercial preparers offering refund anticipation loans (RALs) and refund anticipation checks (RACs). Thirty nine percent of New Mexico EITC and WFTC claimants receive RALs or RACs,38 and low-income taxpayers who claim the EITC represent the majority of the consumers for both products.39 RALs are very short-term loans made to the tax filer so they can receive a refund the same day, but they often come with significant fees and high interest rates. RACs are essentially the same thing except that a taxpayer must open a temporary bank account. Fees for preparation of the return and the RAC account are then deducted from the taxpayer’s refund before a check is issued. Tax preparers who push RALs and RACs often fail to tell their customers that they could receive their refund by electronic transfer in as little as two weeks at no cost. While IRS rules have led to a dramatic decrease in RALs among EITC claimants from 2007 to 2010, during the same time period, the percent of EITC recipients requesting RACs more than doubled, from 26 percent to 56 percent.40 Both RALs and RACs disproportionately harm EITC and WFTC tax filers and can syphon off much of the value of the credits that is intended to help low-wage workers. New Mexico should limit the rate that can be charged on these refund options, mandate and standardize disclosure and marketing practices, and strictly enforce compliance among lenders.

• Support federal efforts to increase the EITC for childless workers
Working, childless adults are the only group effectively taxed into poverty or deeper into poverty by federal income taxes.41 These workers pay significant federal income and payroll taxes, yet receive little to no EITC, the credit that otherwise offsets significant portions of these taxes for low-income workers. In tax year 2013, the average combined credit for recipients in New Mexico with qualifying children was $3,334, while the average combined credit for New Mexico recipients without children was only $301. About 22 percent of EITC and WFTC returns in New Mexico are filed by childless workers, but less than 4 percent of the total EITC credit amount goes to these workers.42 Increasing the EITC for childless workers would not only raise their incomes and help offset taxes that send them into poverty, but, according to recent research, it could also help address low labor-force participation and high incarceration rates of childless, low-income workers.43

• Consider periodic payment options of the EITC and WFTC
The single annual disbursement of the EITC and WFTC can present challenges for workers struggling to support their families throughout the year. Research shows that about 95 percent of EITC recipients carry debt of some kind, and that in many families, significant portions of refunds may be spent on debt payments.44 Paying out a portion of filers’ refunds throughout the year would better enable them to cover daily and monthly expenses without taking on additional debt and then using the refund to pay off that debt (with added interest).45 This would also increase the chances that refunds are spent on local goods and services at local businesses, rather than on high-cost financial products (like payday loans), many of which are serviced by large, multi-state financial institutions. A pilot program in Chicago that issued EITC recipients their refunds on a quarterly—rather than an annual—basis found that periodic payments improved overall financial stability for and reduced financial stress of EITC families. Pilot project researchers also reported that 83 percent of families in the program preferred quarterly payments to the standard annual method.46

Endnotes

1. Quoted by Lea Donosky in “Sweeping Tax Overhaul Now The Law,” Chicago Tribune, October 23, 1986
2. NM Voices for Children analysis of 2013 Internal Revenue Service (IRS) income tax data provided by the Brookings Institute
3. Ibid
4. Income Mobility and the Earned Income Tax Credit: Short-Term Safety Net or Long-Term Income Support, Tim Dowd and John B. Horowitz, 2011
5. KIDS COUNT Data Book, Annie E. Casey Foundation, 2016
6. Center on Budget and Policy Priorities analysis of 2009-2012 American Community Survey data
7. Two Generation Approaches to Poverty Reduction and the EITC, Grantmakers Income Security Taskforce, 2015
8. Who Pays? A Distributional Analysis of the Tax Systems in All 50 States, Institute on Taxation and Economic Policy, 2015
9. U.S. Census Bureau, American Community Survey data, 2015
10. Brookings Institute analysis of 2011 tax year data
11. US Census Bureau, American Community Survey data, 2015
12. Conditions of Low-Income Working Families in the States, The Working Poor Families Project, Population Reference Bureau analysis of U.S. Census American Community Survey data, 2014
13. Low-Income Working Mothers and State Policy: Investing for a Better Economic Future, Deborah Povich, Brandon Roberts and Mark Mather, The Working Poor Families Project, 2014
14. On the Gini Coefficient measure, NM is 40th; on shares of income by quintile, NM is 44th. US Census, American Community Survey, 2014 data (1st being the best ranking a state can have, 50th being the worst ranking)
15. Behavioral Responses to Taxes: Lessons from the EITC and Labor Supply, Nada Eissa and Hilary Hoynes, National Bureau of Economic Research, 2006
16. Two Generation Approaches to Poverty Reduction and the EITC, Grantmakers Income Security Taskforce, 2015
17. Income, The Earned Income Tax Credit, and Infant Health, Hilary W. Hoynes, Douglas L. Miller, and David Simon, National Bureau of Economic Research, 2012; Do Cash Transfer Programs Improve Infant Health: Evidence from the 1993 Expansion of the Earned Income Tax Credit, Kevin Baker, University of Notre Dame mimeo, 2008; and “Effects of Prenatal Poverty on Infant Health: State Earned Income Tax Credits and Birth Weight,” Kate W. Strully, David H. Rehkopf, and Ziming Xuan, American Sociological Review (August 2010), 1-29
18. The EITC: Linking Income to Real Health Outcomes, Hilary W. Hoynes, Douglas L. Miller, and David Simon, University of California Davis Center for Poverty Research, 2013
19. EITC and Child Tax Credit Promote Work, Reduce Poverty, and Support Children’s Development, Research Finds, Center on Budget and Policy Priorities, revised in 2015
20. “Early-Childhood Poverty and Adult Attainment, Behavior, and Health,” Greg J. Duncan, Kathleen M. Ziol-Guest, and Ariel Kalil, Child Development, January/February 2010, pp. 306-325
21. Two Generation Approaches to Poverty Reduction and the EITC, Grantmakers Income Security Taskforce, 2015
22. The Economic Impacts of Tax Expenditures: Evidence from Spatial Variation Across the U.S., Raj Chetty, Nathaniel Hendren, Patrick Kline, and Emmanuel Saez, special report for the US Internal Revenue Service, 2015
23. The Earned Income Tax Credit and Community Economic Stability, Natalie Holmes and Alan Berube, The Brookings Institute, 2015
24. “The economic impact of the Earned Income Tax Credit (EITC) in California.” Antonio Avalos and Sean Alley, California Journal of Politics and Policy, 2010
25. Dollar Wise: The Best Practices on the Earned Income Tax Credit, U.S. Conference of Mayors, 2008
26. An Assessment of the Effectiveness of Anti-Poverty Programs in the United States, Yonatan Ben-Shalom, Robert A. Moffitt, and John Karl Scholz, National Bureau of Economic Research, 2011; The Earned Income Tax Credit at Age 30: What We Know, Steve Holt, The Brookings Institution, 2006
27. The Earned Income Tax Credit, Austin Nichols and Jesse Rothstein, National Bureau of Economic Research, 2015
28. Using the Earned Income Tax Credit to Stimulate Local Economies, Alan Berube, The Brookings Institution, 2006
28. The Earned Income Tax Credit, Austin Nichols and Jesse Rothstein, National Bureau of Economic Research, 2015
30. This rate ranks New Mexico as 42nd in the nation on this measure. Working Poor Families Project analysis of Bureau of Labor Statistics May 2015 Occupational Employment Statistics
31. Testimony of Nina Olson, IRS National Taxpayer Advocate, before U.S. House Appropriations Subcommittee on Financial Services and General Government, February 26, 2014, p. 32
32. “Issues Affecting Low-Income Filers,” Janet Holtzblatt and Janet McCubbin, in The Crisis in Tax Administration, Henry Aaron and Joel Slemrod, Brookings Institution Press, November 2002; and “Noncompliance and the EITC: Taxpayer Error or Taxpayer Fraud,” Jeffrey Liebman, Harvard University, November 1995
33. Department of the Treasury, Agency Financial Report (AFR), fiscal year 2013, p. 207. It is estimated 70 percent of issues relate to complex residency and relationship requirements and confusion on claiming eligible children. The remaining 30 percent of EITC improper payments stem from verification of wage and self-employment income. (EITC recipients are as likely to be self-employed as other taxpayers.) Income verification issues regarding self-employment are a concern in the tax code as a whole, not unique to the EITC.
34. Testimony of John A. Koskinen, IRS Commissioner, before US House Ways and Means Subcommittee on Oversight, February 5, 2014
35. Based on IRS audits of EITC claims in the IRS study, “Compliance Estimates for the Earned Income Tax Credit Claimed on 2006-2008 Returns,” as reported in Estimated Earned Income Tax Credit Annual Overclaims, by the Center on Budget and Policy Priorities
36. “Tax Gap for Tax Year 2006: Overview,” Internal Revenue Service, January 6, 2012. These figures, which are for 2006 tax returns, represent the estimated impact of business under-reporting in the personal income tax; they do not include under-reporting or other sources of error in the corporate income tax.
37. “Reducing Overpayments in the Earned Income Tax Credit,” by Robert Greenstein, John Wancheck, and Chuck Marr, Center on Budget and Policy Priorities, April 7, 2014.
38. NM Voices for Children analysis of 2013 Internal Revenue Service income tax data provided by The Brookings Institute
39. EITC Interactive: User Guide and Data Dictionary, The Brookings Institute, 2015
40. Ibid
41. Strengthening the EITC for Childless Workers Would Promote Work and Reduce Poverty, Chuck Marr, Chye-Ching Huang, Cecile Murray, and Arloc Sherman, Center on Budget and Policy Priorities, 2016
42. NM Voices for Children analysis of 2013 IRS tax data provided by The Brookings Institute
43. Strengthening the EITC for Childless Workers Would Promote Work and Reduce Poverty, Chuck Marr, Chye-Ching Huang, Cecile Murray, and Arloc Sherman, Center on Budget and Policy Priorities, 2016
44. The Earned Income Tax Credit and Community Economic Stability, Natalie Holmes and Alan Berube, The Brookings Institute, 2015
45. Periodic Payment of the Earned Income Tax Credit Revisited, Steve Holt, The Brookings Institution, 2015.
46. Restructuring the EITC: A Credit for the Modern Worker, Dylan Bellisle and David Marzahl, Center for Economic Progress, 2015

Download this report (Jan. 2017; 16 pages; pdf)
Download just the appendix (6 pages; pdf)
Link to the fact sheet

A Working Poor Families Project report.
The Working Poor Families Project is funded by the Annie E. Casey Foundation, Ford Foundation, Joyce Foundation, and The Kresge Foundation.

New Mexico Public School Funding through the Great Recession and Beyond

Empty swings-cropped

Executive Summary

Download this executive summary (Aug. 2016; 4 pages; pdf)
Download the full report by Gerry Bradley, MA (Aug. 2016; 14 pages; pdf)

A lawsuit currently working its way thought the New Mexico court system asserts that the state has failed to provide a uniform system of school funding sufficient for the education of all school-age children in the state, as required by the New Mexico constitution. This failure is evident, the suit shows, in the poor academic performance across racial, ethnic, and socio-economic classifications. This report supports the arguments made by the lawsuit.1

The lawsuit demonstrates that the poor and disparate educational performance of New Mexico’s children is connected to a lack of resources provided to schools. Numerous educational experts and legislative task forces and committees, as well as studies, have drawn attention to the insufficiency of funding for public education in New Mexico. A 2008 report by the American Institutes of Research (AIR)2 found that operational expenditures were underfunded statewide by about $350 million, or nearly 15 percent, at that time.

Also, a recent report from the state Legislature found that New Mexico and Mississippi direct less funding to serving at-risk students than do all other states, despite the large numbers of at-risk students in these two states. Notably, both New Mexico and Mississippi consistently rank at the bottom in assessments of student outcomes.

Like school systems in almost all of the 50 states, New Mexico public school revenue fell sharply during the Great Recession (see Figure I). New Mexico policy-makers addressed the revenue crisis by slashing state spending on public schools and temporarily plugging the gap with federal revenues from the 2009 American Recovery and Reinvestment Act (ARRA). The availability of federal ARRA funds in the 2010 and 2011 school years helped mitigate the state cuts to the school system.

K-12-Figure-I

Public education appropriations were not restored to the 2009 level until fiscal year 2015 (FY15). However, funding still had not recovered to 2008 levels on a per-student, inflation-adjusted basis.

This is because in most years the number of students enrolled in public education grows and inflation chips away at the value of educational expenditures. Given the past eight years of experience, the number of students can be expected to grow by about 0.34 percent per year. A forecast of the Consumer Price Index by the state of New Mexico’s Consensus Revenue Estimating Group shows inflation hovering around 2.5 percent through FY20. However, appropriations grew by about $34 million in FY16 and about $9 million in FY17—or less than is needed to keep pace with inflation and population growth.

Given that the public school appropriation from the state general fund was $2.648 billion in FY17, general fund appropriations for the next three years would need to grow by $74 million (2.84 percent) in FY18, $72 million (2.64 percent) in FY19 and $76 million (2.74 percent) in FY20 merely to keep pace with inflation and growth in the number of students. In addition, the base budget would need to have been increased by $400 million in FY17 to reach the 15 percent increase recommended in the AIR report.

The State Equalization Guarantee

Public school finance in New Mexico is quite centralized: most funding comes from state-level sources rather than local sources, as would be the case in a state that relied heavily on the property tax.

The State Equalization Guarantee (SEG) is the formula that New Mexico uses to distribute funds to the state’s 88 school districts. The SEG is driven mainly by school ‘average daily membership’ or student counts. Total appropriations for the public schools are divided by the number of projected units to derive the SEG unit value. The SEG makes it possible for there to be some local control over how funds are spent even though the funding system is centralized.

The blue line in Figure II shows that the SEG increased smoothly for almost three decades—from school year 1984-85 to SY 2008-09—before dropping at the onset of the current recession, from which New Mexico is still struggling to recover. The orange line, which provides a picture of the value of the SEG adjusted for inflation, shows a much more truncated growth trajectory.

K-12-Figure-II

As the SEG fell in SY 08-09, student enrollment in the state’s public schools was trending slowly upward at an average rate of about 0.34 percent (the green line). The state’s public schools were expected to do more with less.

Revenues for Public Schools

Broadly speaking, there are four uses of revenues in the Public Education Department accounting system: operational, special projects, capital outlay, and debt service. Each of the uses relies on revenues from different sources, but only operational and special projects revenue are included in the SEG.

Revenues going to each of the four classifications fluctuated in different ways during the past eight years.

Revenue for the largest classification—operational expenses—fell during the recession and began a slow recovery in SY 11-12. In contrast, revenues for ‘special projects’ increased during the recession, as federal funding accounts for a significant share of revenue for this category. This funding includes a wide array of programs, from school lunches to Title I funds for schools in high-poverty neighborhoods.

By combining operational and special projects revenues we get a more focused picture of the resources available to school districts. Figure III shows nominal and inflation-adjusted per-pupil revenues for operations and special projects combined. Inflation-adjusted revenues reaching $8,528 in SY 14-15 were still below the peak reached in SY 08-09 ($9,551).

K-12-Figure-III

‘Below-the-Line’ Funding

An issue that has come to the fore in the school funding discussion in the past five years is that of the amount of school funding provided through the SEG and the amount appropriated apart from the SEG, which is referred to as below-the-line funding. The fact that an increasing amount of funding does not go through the SEG may be seen as a problem for local school districts, because non-SEG funding is earmarked for specific purposes and cannot be used for the priorities of the local school districts. Arguably, local school districts are closest to their specific problems and may be better able to respond to local issues.

Figure IV shows that the SEG unit value has risen from $3,871.79 in FY 09 to $4,027.75 in FY 16. This represents an increase of $156 or 4.03 percent over that time period.

Figure V shows that ‘below the line’ or non-SEG appropriations have increased at a significantly steeper rate, from $39.6 million in FY 09 to $101 million in FY 16. The increase in non-SEG funding represents movement away from the principles of the state’s system for funding public schools, which is intended to provide equality of opportunity irrespective of the relative wealth of individual school districts.

K-12-Figure-IV-V

In conclusion, the Great Recession inflicted a serious blow to New Mexico funding for public education. It has taken eight years to emerge from the havoc created by that economic earthquake. In addition, most years the number of students enrolled in public education grows and inflation chips away at the value of educational expenditures.

The lawsuit filed by the New Mexico Center on Law and Poverty has described the problems facing the state’s public education funding system in detail. This report maps out the recent history of public school funding and the continued erosion of the resources going to the school system. Following the recommendations of the 2008 American Institute for Research study to increase public school funding by at least 15 percent would be a way to begin solving the funding problem faced by the New Mexico public school system. This would add about $400 million to the FY 17 appropriation of $2.648 billion. This increase would establish a new base of $3.048 billion from which to build in future years.

Endnotes

1. Complaint: “Lawsuit Filed Challenging Sufficiency of State Education,” New Mexico Center on Law and Poverty, July 2015, http://nmpovertylaw.org/wp-content/uploads/2015/08/Complaint-Yazzie-Second-Amended-Complaint-2015-07-14.pdf
2. An Independent Comprehensive Study of the New Mexico Public School Funding Formula–Final Report, American Institutes for Research, January 2008

Download this executive summary (Aug. 2016; 4 pages; pdf)
Download the full report by Gerry Bradley, MA (Aug. 2016; 14 pages; pdf)

The Fiscal Policy Project, a program of New Mexico Voices for Children, is made possible by grants from the Annie E. Casey Foundation, the McCune Charitable Foundation, and the W.K. Kellogg Foundation.

Our budget is in crisis

Download this fact sheet (Feb. 2016; 2 pages; pdf)
by Amber Wallin, MPA
budget crisis fact sheet
budget crisis fact sheet2

Download this fact sheet (Feb. 2016; 2 pages; pdf)

A Health Impact Assessment of a Food Tax in New Mexico

An analysis of the taxation of grocery purchases and its impacts on the health of the state’s children, families, and communities

HIA report-cover
Download this executive summary (Nov. 2015; 12 pages; pdf)
Download the full report and appendix (Nov. 2015; 94 pages; pdf)
Link to the press release

Executive Summary

This document summarizes findings from a health impact assessment (HIA) that was conducted in 2014 and 2015 on the potential health impacts of a reinstatement of a tax on grocery purchases in New Mexico. This HIA report is intended to be an accessible and informative resource for New Mexico residents and policy makers (at both the state and local level) interested in the issue of taxing food in New Mexico. The report is intended to inform the decision-making process by describing the potential positive and negative health impacts that could result from a tax on food.

The New Mexico Voices for Children HIA team also recognizes that other state and local governments have considered or may in the future address food taxes, and it is hoped that this HIA may be of value to decision makers and stakeholders in those areas as well. In a broader sense, the framework of this HIA—examining how tax policy can affect health—should be a relevant basis on which to consider “health in all” policies and the health impacts of other tax and economic policy decisions, both in and outside of New Mexico.

Acknowledgements

This project was supported by a grant from the Health Impact Project, a collaboration of the Robert Wood Johnson Foundation and The Pew Charitable Trusts. Over the course of the project, the New Mexico Voices for Children’s (NMVC) health impact assessment team received valuable input and participation from a variety of stakeholders, including community members, nonprofit and faith leaders, food bank and food pantry employees, researchers, academics, government officials, and public health experts. We thank them for their willingness to share their valuable time and significant experiences for the benefit of the project.

We extend special thanks and deep gratitude to the stakeholders who served on the HIA Advisory Council (see Appendix A in the full HIA report for a complete list of Advisory Council members). These experts brought an incredible body of knowledge, passion, and expertise to the project, and they were crucial to its execution. We also wish to thank Kari Bachman, M.A., with Doña Ana Place Matters, Jordon Johnson, Ph.D. with McKinley Community Place Matters, Rodrigo Rodriguez with the SouthWest Organizing Project, and Janet Page-Reeves, Ph.D., with the Department of Family and Community Medicine at the University of New Mexico Health Sciences Center. Their input and expertise was critical to conducting focus group research and gathering community feedback on the possible health impacts of a tax on food.

This HIA would not have been possible without the guidance and support of Amber Lenhart, M.P.H., of the Health Impact Project; Tia Henderson, Ph.D. and M.S.T., and Heidi Guenin, M.U.R.P. and M.P.H. of Upstream Public Health; and Mandy Green, M.P.H. of Green Health Consulting.

Disclaimer

The authors of this report are responsible for the facts and accuracy of the information presented. The views expressed are those of the authors and do not necessarily reflect the views of the Food Tax HIA Advisory Council, the Health Impact Project, The Pew Charitable Trusts or the Robert Wood Johnson Foundation.

Project Background

In October of 2014, New Mexico Voices for Children (NMVC) received funding from the Health Impact Project—a collaboration of the Robert Wood Johnson Foundation and The Pew Charitable Trusts—to conduct a health impact assessment (HIA) on the possible reinstatement of a tax on food purchased for consumption at home in New Mexico. A health impact assessment is defined as “a systematic process that uses an array of data sources and analytic methods and considers input from stakeholders to determine the potential effects of a proposed policy, plan, program or project on the health of a population and the distribution of those effects within the population. HIA provides recommendations on monitoring and managing those effects.”1

In considering the value of an HIA on a food tax, the NMVC HIA team first noted that public health—or the consideration of how community health is supported, or at risk, before anyone feels sick and needs to visit the doctor—was not part of the discussion on the issue. While NMVC had previously engaged in policy work and research on the food tax, the staff had not examined how it could potentially impact health. The NMVC HIA team then considered and gathered stakeholder and expert input on the existing health conditions in New Mexico as well as how these health conditions might be impacted by a tax on food.

After consulting with stakeholders and considering the decision to be made and the current debate around the issue, the NMVC staff determined that the possible health impacts of a reinstatement of a tax on food might not be considered unless an HIA on the topic was done. The decision to conduct an HIA was also strongly influenced by the likely timeline of the introduction and discussion of a bill to tax food, its potential impacts on family economic security and health outcomes, the intersection of health and tax policy, and the background and policy expertise among NMVC staff and partners in these areas.

Food Tax HIA Goals

    1. Inform public opinion and government decisions on the potential health impacts of food tax policy;
    2. Ensure that any potential health impacts of a food tax are rigorously evaluated and considered when decisions related to food taxation are being made;
    3. Demonstrate the policy’s health impacts on particularly vulnerable groups, as well as to engage these groups and help build advocacy resources for them;
    4. Demonstrate how tax, economic, and budgetary policies can impact health outcomes;
    5. Create new and/or strengthen ongoing partnerships between health and non-health groups; and
    6. Increase organizational, partner, government, and community capacity to conduct and use HIAs.

The development of the scope of the HIA, as well as the HIA process, were driven by the accepted values of democracy, equity, ethical use of evidence, and a comprehensive approach to health that underpin HIA.2

HIA Methodology

HIA is defined as “a systematic process that uses an array of data sources and analytic methods and considers input from stakeholders to determine the potential effects of a proposed policy, plan, program or project on the health of a population and the distribution of those effects within the population. HIA provides recommendations on monitoring and managing those effects.”3

An HIA is conducted in six primary stages: screening, scoping, assessment, recommendations, reporting, and monitoring/evaluation. Stakeholder engagement is essential to and happens in every stage of the HIA process. The steps of an HIA4 are outlined in Figure I.

HIA stepsFood Tax HIA Research Methods

This health impact assessment relied on five primary research methods to identify and evaluate the potential health impacts of reinstating a tax on food: 1) literature review, 2) evaluation of existing conditions, 3) quantitative data analysis, 4) key stakeholder interviews, and 5) focus groups. A full discussion of the findings, methods, and data sources can be found in the full HIA report.

History of the Food Tax in New Mexico

Prior to 2004, New Mexico taxed food that was purchased for consumption at home under the state’s gross receipts tax (GRT), the state’s version of a sales tax. In 2004, the state Legislature exempted food groceries from the GRT. (Food purchased from restaurants is still taxed, as are non-food groceries such as paper products.) The legislation contained a “hold-harmless” provision whereby the state would compensate cities and counties for their portion of the revenue lost from this new exemption. Over time the value of the exemption grew to be approximately $250 million per year—much more than was originally estimated.

In 2013, a new law was enacted that phased out the hold-harmless payments over a 15-year period. This was done to offset the cost of a major corporate income tax cut. This new law also allowed cities and counties to recoup the loss of the hold-harmless revenue by imposing small increments of the local GRT. However, many local governments are faced with declining revenues, and many local officials have resisted raising their GRT rates. In 2014, some local government officials called for legislation to allow local governments the option to tax food. Since then, multiple bill versions have been discussed that include a reinstatement of a tax on food.

Policy Alternatives

State legislators—under pressure from the local governments faced with declining revenues as well as lawmakers wishing to overhaul the state’s entire tax system—are now considering reinstating a tax on food. New Mexico policy makers have drafted, proposed, and/or discussed multiple bills that would reinstate the GRT on food. Recently proposed legislation has included two options. The tax overhaul proposal would add food to the tax base and eliminate many other deductions and exemptions in order to reduce the total GRT rate on all goods and services. A second proposal would allow cities and counties to tax food but would not apply state-level taxes. Some cities and counties have also advocated for a referendum that would allow voters in each constituency to decide whether to tax food.

HIA-Portrait of NM

While conducting the HIA, the HIA team focused only on the food tax component of proposed legislation and the health impacts that could result from any new tax on food. The non-food-tax components of the bills seeking to overhaul the tax system differ from tax package to tax package to the extent that it is not possible under current time and resource restraints to thoroughly evaluate the health impacts of each different tax package comprehensively. These components were considered, however, but only generally for contextual purposes and specifically for the Secondary Policy Recommendations section of this report.

HIA-State food tax policies

Timeline for the Decision-Making Process and the HIA

A bill to reinstate the food tax could be introduced and passed by state legislators—and either signed or vetoed by the Governor—as early as the 2016 legislative session. The bill could be written so that food could be taxed by the state as soon as mid-2016. If a bill to give local governments the option to reinstate a food tax is enacted, local governments could begin formally considering the tax under a timeline determined by state law and by each local government, though those laws would not likely go into effect until 2017 at the earliest.

Health Determinants Related to a Tax on Food

Health determinants are any factors that contribute to a person’s state of health and can include income, access to transportation and healthy food, neighborhood safety, etc. According to the World Health Organization, social determinants of health are “the complex, integrated, and overlapping social structures and economic systems that are responsible for most health inequities. Social determinants of health are shaped by the distribution of money, power, and resources throughout local communities, nations, and the world.”5 Health determinants shape the places in which people are born, learn, grow, work, and live, and are key influences on peoples’ health throughout their lives.

If a tax on food is reinstated, three things could happen that could have a strong influence on health determinants that impact health in New Mexico. The cost of purchasing food would increase for most grocery purchases, changing the economic security of families, particularly those with low incomes. Households have a limited amount of money in their budget; if a food tax emerges, households have to decide where that extra money to pay a tax would come from. Households would either:

    1. Maintain their current food purchasing patterns, which would mean increasing the amount of money they spend on food and decreasing spending in other budget areas, or
    2. Maintain their current food budget, which would require them to change their spending habits on food by buying less food or buying lower-cost food.

At the same time, a food tax would cause government revenues to increase, which would change government spending (either directly or indirectly through other changes to the tax code). This means governments could:

    3. Be able to maintain current service levels (in the case of municipalities that are facing budgetary shortfalls), or could increase spending for current programs, create new programs, cut other taxes, or reduce tax rates (the latter being the case with a state-level tax system overhaul).

From these outcomes and the logic outlined above, and based on community, Advisory Council, and key stakeholder input, as well as on a preliminary review of existing literature, NMVC selected the following three health determinant logical pathways for further study:

  1. Family Economic Security: Non-Food Living Expenses
  2. Family Economic Security: Food Insecurity, Diet, and Nutrition
  3. Direct Government Spending: Maintaining Current Services

HIA-Summary diagram

Potentially Vulnerable Populations

A core tenet of HIA is to consider health equity, highlight health disparities, and systematically evaluate health impacts of a potential project, program, or policy (in this case, a tax on food) on particularly vulnerable populations that may be disproportionately affected by a policy or face harmful health effects at greater rates or more detrimental levels.6 When available, data were disaggregated by population characteristics including, but not limited to age, gender, income, place of residence, and race or ethnicity whenever data or research was available in order to best understand the health impacts that a change in food tax policy would have on the following populations that were identified by the HIA project team and Advisory Council as particularly vulnerable:

  1. Children
  2. People of color
  3. Low- and lower middle-income families and individuals

The potential health effects on elderly New Mexicans (adults ages 65 and older), residents of rural areas, and residents of food deserts (places without reliable access to affordable sources of healthy food) were also analyzed when possible.

Overall Assessment Findings

Reinstating a tax on food in New Mexico may affect several health factors. The analysis conducted as part of this HIA through a literature review and both quantitative and qualitative research suggests that implementing a food tax is likely to have an overall negative impact on health through multiple health factors; while there are some potentially positive health impacts that could result, these are less likely. A full discussion of the findings, methods, and data sources can be found in the full HIA report.

Health Impacts of a Food Tax on Family Economic Security: Taxing food would cost each New Mexico household around $350 per year, or $29 per month, on average. Highest-income earners in New Mexico would spend about one-half of 1 percent of their income on a food tax, while the lower half of New Mexico earners would spend around 1 percent of their income on the food tax alone—double the rate that high earners would pay. Research and calculations show that a food tax would exacerbate the tax system’s regressivity—that is, it would hit low-income earners harder than it would hit high- income earners—and could harm family economic security, which could have negative impacts on mental health and stress levels, income available for other necessary purchases besides food, need and demand for public assistance, childhood development, ability to pay for health services and medicine, economic equity, and the ability to manage chronic conditions through diet.

Health Impacts of a Food Tax on Food Security, Diet, and Nutrition: Taxing food could also have an adverse impact on food security, diet, and nutrition by prompting purchases of less food or cheaper, less nutritious food. This could have important and harmful implications for health, particularly nutrition-related chronic conditions, the ability to manage chronic conditions through diet, childhood development and learning capacity, malnutrition issues, the incidence of low birth-weight and/or preterm babies, and the need and demand for food assistance from public, private, and nonprofit sources.

Health Impacts of a Food Tax on Government Spending: It is also possible that the negative health impacts of taxing food could be mitigated by how that revenue is spent. If food tax revenues lead to overall increased government spending on direct health services, food assistance and nutrition programs, programs that provide recreational opportunities, and education, then the food tax could have positive implications for health, or at the very least have no net negative implications. However, it is more likely that food tax revenue would be used to make up for decreasing revenue and so be used to maintain current service levels. Though it is possible that any increases could be spent on the programs noted above, for most program areas, it is unlikely, particularly at the municipal level.

The findings of this report are presented on the next page and discussed in detail in the full HIA report (download here).

HIA-Summary table

Policy Recommendations

The following recommendations were drawn from findings based on literature, data, and stakeholder feedback and are intended to improve population health in New Mexico, maximize health benefits, and minimize health risks. One key finding of this project is that the tax code is an important health determinant and can play a significant role in child and family health and well-being. The policy recommendations that follow are driven by that finding and the idea that changes to tax code should improve and not exacerbate the health and well-being challenges of New Mexico families. More detail on each of the recommendations can be found in the full HIA report.

Primary Policy Recommendations

Do not tax food. The HIA team strongly recommends that the food tax deduction is not repealed and food is not taxed due to the potentially harmful health impacts, regressivity, and increased health disparities that could result.

Generate revenue in other ways. If it is determined that new revenue is needed, instead of a food tax, New Mexico should consider other taxes that would likely have a less harmful effect on the health of vulnerable populations in New Mexico and potentially address some of the existing regressivity in the tax code. These include repealing the capital gains deductions; increasing corporate income taxes or fees collected from large and/or multi-state corporations; mandating combined reporting; enacting higher personal income tax rates for very high-income earners; and raising taxes that are associated with curbing unhealthy behavior.

Secondary Policy Recommendations

Given that New Mexico has high rates of poverty and food insecurity, several other policy recommendations should be considered to help improve the health determinants and outcomes that many New Mexicans are facing now, even without a tax on food.

Note: These recommendations are targeted towards improving families’ day-to-day economic security, food security, diet, and nutrition and do not in any way serve as an endorsement of a tax on food. While they could mitigate some of the harmful effects of a food tax, they would not likely address all or even most of those effects. Rather, these policy recommendations should be considered not just in addition to, but also apart from, any decision about taxing food.

Increase current state tax credits and create new credits for low-income families with children. Increasing tax credits for low-income families with children is one way to combat the regressivity of the state’s tax system and lift working families out of poverty. Changes could include increasing the Low-Income Comprehensive Tax Rebate and the Working Families Tax Credit (based directly on the federal Earned Income Tax Credit). The state could also implement a state Child Tax Credit based on the federal credit. Making payments of anticipated refundable credits available on a monthly basis would also help low-income families provide basics like healthy food on a more consistent basis throughout the year than is reasonable with one yearly payment.

It is important to note that though tax credits make the tax system more progressive, they do not address the underlying causes of poverty and food insecurity—they simply help to mitigate them. And while tax credit participation is higher in New Mexico than nationwide, many eligible participants do not receive the credits. To be most effective, tax credits must be paired with public awareness campaigns and free tax preparation assistance for low-income filers.

Increase and/or maximize programs that help to improve the diet- and nutrition-related health outcomes of vulnerable populations. To make improvements in this area, policy-makers could increase appropriations for services directly related to food insecurity and hunger, particularly in rural and frontier areas; increase SNAP enrollment by maximizing available program benefits and streamlining enrollment and recertification; increase utilization of USDA at-risk meal program funds; take full advantage of community eligibility for free and reduced-price school lunches; improve data sharing under the New Mexico Health Information Act; increase coordination and administrative resource sharing for administering food programs; and increase the statewide minimum wage and index it to inflation.

Endnotes

1 National Research Council of the National Academies, 2011
2 World Health Organization, 1999
3 National Research Council of the National Academies, 2011
4 HIA Process, The Pew Charitable Trusts, August 2014
5 “Closing the gap in a generation: health equity through action on the social determinants of health,” final report of the Commission on Social Determinants of Health (CSDH), World Health Organization: Geneva, 2008
6 North American HIA Practice Standards Working Group, 2014

Download this executive summary (Nov. 2015; 12 pages; pdf)
Download the full report and appendix (Nov. 2015; 94 pages; pdf)
Link to the press release

Suggested Citation: Wallin, A., Casau, A., Jimenez, J., Bradley, G., Kayne, S. (2015). A Health Impact Assessment of a Food Tax in New Mexico: An analysis of the taxation of grocery purchases and its impacts on the health of the state’s children, families, and communities, New Mexico Voices for Children.

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