by Kris Nordstrom, MPP
Director of Research
October 21, 2026
Do we really want to bankrupt New Mexico’s state government to give millionaires an extra $150,000 a year while making life harder for the state’s lowest-income residents? That is the staggering implication of proposals to eliminate New Mexico’s personal income tax.
A recent presentation to the Legislature’s Revenue Stabilization & Tax Policy Committee lays bare the potential consequences of this proposal. Analysis by nonpartisan economists at the Legislative Finance Committee highlights a fundamental problem: The benefits would flow overwhelmingly to the wealthy, while low-income New Mexicans could actually end up worse off.
According to the analysis, eliminating the personal income tax would deliver an estimated $150,000 in annual tax savings to New Mexicans earning more than $1 million a year. Meanwhile, households earning less than $25,000 annually could see their incomes fall by $427 a year if the elimination of the income tax also results in the loss of refundable tax credits that help low-income families.
Consider the disparity: Millionaires could save $150,000 a year, while New Mexicans earning less than $25,000 could lose hundreds of dollars in support they depend on to make ends meet.
That is not a policy designed to help those who need it most. It is a sweeping tax change whose benefits would be concentrated among the wealthiest taxpayers, with potentially damaging consequences for families already struggling to get by.The fiscal consequences could extend far beyond individual tax bills. Personal income taxes provide critical revenue for the state government, helping fund the public services and investments New Mexicans depend on. Eliminating that revenue would force lawmakers to confront difficult choices: cut public services, raise other taxes and fees, or scale back other priorities. Schools, health care, infrastructure, public safety, and support for vulnerable residents could all face increased pressure.
Proponents of eliminating the income tax owe New Mexicans clear answers. Where would the replacement revenue come from? Which public services would be cut if the money were not replaced? Would other taxes and fees increase? And why should working families bear the consequences of a policy that could deliver six-figure tax savings to millionaires?
Tax policy should be judged by whether it strengthens New Mexico’s economy, supports working families, and provides a fair and sustainable way to fund essential public services—not by how dramatically it reduces the tax bills of the wealthiest residents. Meaningful tax reductions should prioritize households struggling with the rising costs of housing, food, health care, and other necessities.
New Mexico deserves a tax system that serves the public interest, not one that places the greatest benefits in the hands of those who are already financially secure. Any proposal to eliminate the personal income tax must account for the revenue lost, the services at risk, and the effects on taxpayers across the income spectrum.
The Legislative Finance Committee’s analysis raises serious questions about whether eliminating the personal income tax would deliver broadly shared benefits. When taxpayers earning more than $1 million stand to save $150,000 annually while households earning less than $25,000 could lose hundreds of dollars, lawmakers must confront who benefits, who pays, and what the state stands to lose.
New Mexico’s lawmakers should focus on tax policies that provide meaningful savings to working families, protect essential public services, and ensure that the state’s tax system remains fair and fiscally sustainable. The goal should be a stronger New Mexico for everyone, not a tax windfall for millionaires at the expense of the broader public.
Eliminating New Mexico’s personal income tax would wipe out an estimated $2.3 billion in annual state revenue. That is not a minor budget adjustment. It would fundamentally reshape the state’s ability to fund public services—and raise a basic question: Who would benefit from the tax cuts, and who would bear the cost?
The stakes are enormous. $2.3 billion is roughly half of what New Mexico spends on public schools each year and $750 million more than the state spends on higher education. How would lawmakers replace that revenue? If they cannot, what would they cut? Would public schools lose teachers and resources? Would universities and community colleges face deep reductions? These are not abstract budget questions. They concern the services, opportunities, and economic security that New Mexicans depend on.
The debate also reflects a much larger question about tax policy. For decades, proponents of tax cuts for high-income Americans have argued that reducing taxes on the wealthy would ultimately benefit working people through greater investment, economic growth, and higher wages. Critics point to the uneven distribution of the benefits and question whether those promised gains have materialized for ordinary families.
Consider the federal tax system. The top individual income tax rate fell from 70% in 1980 to 37% today, while preferential tax rates on long-term capital gains have helped reduce taxes on investment income. Research by Oxfam America found that the 400 wealthiest billionaire families in the United States paid an average effective federal individual income tax rate of just 8.2% in 2021. These figures raise an important question: Should New Mexico further reduce the tax obligations of its wealthiest residents when the state faces substantial needs in education, health care, and family support?
Of course, New Mexicans deserve policies that help them keep up with the cost of living. Families are confronting pressures from housing, groceries, health care, child care, and other essentials. The answer, however, depends on which policies deliver meaningful benefits to the households that need them most, and how those policies will be funded.
New Mexico already has programs designed to help families make ends meet. Refundable tax credits, including the state’s Working Families Tax Credit and Child Tax Credit, provide direct financial support to eligible households. The state’s universal child care program has substantially reduced child care costs for participating families, with estimated savings averaging $14,000 per child annually. New Mexico has also made significant progress in reducing child poverty.
These programs demonstrate why the details of tax policy matter. Eliminating a source of state revenue could jeopardize the funding available for programs that support working families, while the largest direct tax savings could accrue to households earning more than $1 million a year. Any serious proposal to eliminate the income tax must account for both sides of that equation.
Lawmakers will also face opportunities to consider additional ways to reduce health care costs, expand access to affordable coverage, strengthen income supports, protect workers’ rights, and invest in education. Each proposal deserves careful evaluation: Who benefits? How much does it cost? What evidence supports its effectiveness? And can New Mexico sustain the investment over time?
A fair and sustainable tax system must do more than lower tax bills. It must also provide the resources needed to maintain public services, expand opportunity, and help families build financial security. Eliminating the personal income tax would put those priorities under significant pressure unless lawmakers identify a credible and sustainable way to replace the lost revenue.
New Mexico’s tax debate should be about more than how much the wealthiest residents can save. It should be about the kind of state New Mexicans want to build, and how to pay for it without shifting disproportionate costs onto working families.