By Stephanie Schardin Clarke, New Mexico Secretary of Taxation and Revenue — Recently, some New Mexico lawmakers urged Gov. Michelle Lujan Grisham to call a special session and eliminate New Mexico’s personal income tax outright. On its face, it sounds fair — especially to New Mexico’s working families.
Commentary
Stephanie Schardin Clarke serves as cabinet secretary of the Taxation and Revenue Department.
Don’t be fooled: it’s the lowest-earning New Mexicans who would pay the price, gaining little in return. If the personal income tax gets scrapped, the lowest-earning 54% of taxpayers — well over a half-million filers — would see average tax relief of just $122 per year. The topearning 16% would receive $8,000 per year. The top 5% — just 57,000 taxpayers — would clear more than $13,000 per year. This is a wealth transfer to the top of the income scale, paid for by the New Mexicans at the bottom.
The state has already provided targeted tax relief to the families that need it most. Our Child Tax Credit, signed into law by the governor in 2022, offers families up to $637 per year per child. The majority of seniors no longer pay taxes on their Social Security income. The Working Families Tax Credit saves families an average of $650 each year, and the Low-Income Comprehensive Tax Rebate provides nearly $150 in average yearly savings. These reforms have paid off: New Mexico leads the nation in reducing child poverty.
Aside from squeezing the state’s lowest earners, dropping the personal income tax would blow a $2.2 billion hole in the state budget, forcing painful distortions across state programs. It would require cutting the essential services the lowest earners rely on most, raising other taxes, or both. It would leave the state more dependent on its most volatile revenue source — oil and gas — condemning New Mexico to the same boombust cycle that has hamstrung our progress for decades.
We can do better. A tax code designed for long-term growth must work for businesses as well as families. That’s why this administration reduced gross receipts taxes for the first time in 40 years, saving businesses and consumers more than $262 million every year. Our tax code is lifting up New Mexican businesses, and it’s paying off: New Mexican families are leading the nation for income growth, according to the U.S. Census Bureau. Creating a fair tax code is like tuning a piano: adjust one string and every note around it will go flat unless you retune the whole instrument.
And we have made a lot of progress: Between 2018 and 2024, New Mexico’s tax code jumped from 27th to 9th in a national tax fairness ranking published by the independent Institute on Taxation and Economic Policy. That means we’re well tuned, by all objective measures.
Repealing the personal income tax would put us in a worse position than where we started. New Mexico’s tax system should continue to be both fair and competitive, supporting economic growth while ensuring everyone pays their share toward the public investments that keep our state strong.