New Mexico's House Tax Committee recently heard testimony on a proposed bill, HB 275, which aims to eliminate the state's personal income tax. The bill, led by Republican Representative Elaine Sena Cortez of Hobbs and introduced by several other legislators, seeks to leverage the state's substantial budget surpluses for economic reform.
Paul Gessing, president of the Rio Grande Foundation (RGF), testified in favor of HB 275. He highlighted New Mexico's financial position, noting that the state has $13.6 billion in general fund revenue against a proposed budget of $10.9 billion, leaving a surplus of $2.7 billion. Additionally, New Mexico holds $58 billion in sovereign wealth funds and $6 billion in unspent capital outlay money.
Gessing pointed out that the state generates $2.1 billion annually from personal income tax revenue. Eliminating this tax would still leave nearly $600 million available after accounting for this loss in revenue.
The RGF president argued that eliminating the income tax could help diversify and grow New Mexico's economy beyond its reliance on oil and gas without necessitating spending cuts. He emphasized that New Mexico has the third highest poverty rate and faces slower population growth compared to neighboring states.
Gessing also compared New Mexico’s personal income tax rate with those of surrounding states: "It has the highest PIT in region at 5.9% Colorado is 4.4%, Utah at 4.65%, Texas Zero, Arizona 2.5%." He noted that nine states have no personal income tax, highlighting their economic growth as an example for New Mexico to follow.
Furthermore, Gessing suggested that eliminating the personal income tax could improve workforce participation rates and attract high earners to address healthcare workforce challenges within the state.
In his testimony, he concluded that removing the personal income tax would provide a boost to New Mexico’s economy and enhance its competitiveness as a destination for businesses and jobs.
