From The Rio Grande FoundationThe following opinion piece ran in the Santa Fe New Mexican on April 22nd, 2022. The piece also ran in other newspapers throughout the state.
The fundamental economic problem New Mexico faces is its unattractive business climate. Addressing the gross receipts tax and its “pyramiding” and taxation of services as business inputs has been discussed for years now, but it is time to seriously consider bolder economic reforms like reducing or even phasing out New Mexico’s personal income tax.
Indeed, the personal income tax is expected to generate just over $2 billion in fiscal year 2023. That’s a lot of money, but New Mexico is in a financial position to reduce income tax rates over time. Combined with business-friendly gross receipts tax reform, modest budgetary restraint (annual spending simply can’t grow by 15 percent) and a focus on truly diversifying New Mexico’s economy could allow New Mexico to become income-tax-free.
Nine states already lack an income tax. Most New Mexicans know that Texas with its prodigious oil supplies does not tax personal incomes, but most other states lacking income taxes have nothing like our oil and gas revenues. Florida has no income tax. Same with Tennessee and South Dakota. New Hampshire has both no income tax and lacks a sales tax. None of them has significant oil revenues.
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