New Mexicans struggling to keep up with grocery bills, gas prices, and utility costs are at the center of a growing debate over how the state should deliver financial relief. Republicans are pushing to phase out personal income taxes, while Democrats are proposing higher wages and expanded tax credits to help families make ends meet.
New Mexico lawmakers are debating how to address rising living costs ahead of the Nov. 3 election. Republicans, including gubernatorial candidate Gregg Hull, propose phasing out the personal income tax, while Democrats, including candidate Deb Haaland, favor raising the minimum wage and expanding child tax credits.
Legislative Finance Committee analysis suggests eliminating income tax would benefit higher earners most, offering little to low-income or fixed-income residents. Wage increases and tax credits would target workers and families with children but wouldn’t help all groups, such as retirees. Lawmakers face tradeoffs between relief and state revenue needs.
With the Nov. 3 general election approaching, the competing proposals raise a central question: Which approach would put more money in the pockets of those who need it most?
The issue came up during a meeting of the New Mexico Legislative Finance Committee’s Revenue Stabilization and Tax Policy Committee, where lawmakers reviewed how changes to the state’s tax structure could affect residents at different income levels and how much the changes might cost the state.
Rep. Luis Terrazas, a Republican from Silver City, said inflation has made everyday expenses especially difficult for older residents who depend on Social Security and have little room in their budgets for unexpected costs.
“There are old ladies that are on fixed incomes; all they’ve got is their Social Security, Mr. Chair,” Terrazas said. “And with all this inflation, they’re choosing well I got to pay my light bill, I can’t go out on Sunday to dinner, lunch, and spend time with friends. And it’s really impacting them the most.”
For people living on fixed incomes, even small increases in basic expenses can mean giving up activities or purchases that once fit within their budgets. For working families, rising costs can leave less money for savings, child care and other necessities.
But deciding how to ease that pressure is not simple. Lawmakers must consider who would benefit from proposed tax changes, how much relief households would receive, and whether the state could afford to lose the revenue.
“It’s a constant balancing act, right, how do you prioritize the adequacy and simplicity with maybe the equity,” said Ismael Torres, chief economist for the Legislative Finance Committee.
The debate is also taking shape in the gubernatorial race, where Republican candidate Gregg Hull has proposed phasing out the state’s personal income tax, with a focus on lower-income earners. Democratic candidate Deb Haaland, meanwhile, has proposed raising the minimum wage and increasing the child tax credit.
Both candidates have put affordability on their agendas, but their proposals would help residents in different ways.
Hull’s proposal would gradually eliminate the personal income tax, allowing residents who pay the tax to keep more of their earnings. Republican Sen. Nicole Tobiassen of Albuquerque called the plan a worthwhile way to help families struggling with rising expenses.
“I think it’s a wise plan to try and implement,” Tobiassen said. “We have so many hardworking families in New Mexico that are really struggling, and we can do something about that very easily in a conservative way.”
Supporters see lower taxes as a way to give residents greater control over their money, whether they need it for groceries, housing, transportation, or other household expenses.
However, critics question whether eliminating the tax would deliver the greatest benefits to those with the least financial flexibility.
Rep. Derrick Lente, a Democrat from Sandia Pueblo who chairs the House Taxation and Revenue Committee, said the Legislative Finance Committee’s analysis suggested that higher-income residents would receive the largest benefits from eliminating personal income taxes.
“When we talk about eliminating personal income tax, it seems to me that based on the numbers that were presented by the Legislative Finance Committee, that those that were millionaires, those were at the upper echelon of income earners in the state were to benefit the most,” Lente said.
That concern reflects a basic difference in how tax cuts affect households. People who owe more in personal income taxes have more tax liability to eliminate. Residents with little or no taxable income may receive little direct benefit from eliminating the tax, even if they face some of the same increases in living costs.
For retirees who rely largely on Social Security, the effect would depend on their taxable income and individual tax situation. A broad income tax cut, on its own, may not provide much additional help to people who owe little or no personal income tax.
Eliminating the tax would also leave the state with less revenue to support public services unless lawmakers found other sources of funding or reduced spending.
Haaland’s proposals take a different approach, focusing on increasing earnings and providing additional assistance to families with children.
Raising the minimum wage could give eligible workers more income to cover everyday expenses. Increasing the child tax credit could provide qualifying families with additional financial support as they manage the costs of raising children.
Unlike an income tax cut, a wage increase would directly affect eligible workers’ pay, while an expanded child tax credit would target assistance to qualifying families. The amount of help would depend on the details of the proposals and who qualifies.
Neither measure, however, would address every household’s needs. Retirees living on Social Security generally would not benefit directly from a minimum wage increase, while families without children would not receive the same assistance from an expanded child tax credit.
The differences illustrate why lawmakers face a difficult task in designing relief that reaches New Mexicans with varying incomes and circumstances.
A worker struggling to afford rent and groceries may need higher take-home pay. A parent may need additional help covering child care and other family expenses. An older resident living on a fixed income may need assistance that does not depend on employment.
No single proposal would necessarily meet all those needs.
Lawmakers must also weigh the immediate benefits to households against the longer-term effects on the state’s finances.
Personal income tax revenue helps pay for government services and public programs. Phasing out the tax would require the state to determine how to manage the resulting revenue loss. Proposals involving higher wages and expanded tax credits also require consideration of their costs and effects on workers, families, and employers.
Torres’ comments during the committee meeting highlighted the challenge of balancing a tax system that raises enough money to fund government with one that treats taxpayers fairly and remains manageable.
For residents facing higher bills, those policy questions can feel distant from the daily challenge of making a paycheck last until the next one. But the outcome could affect how much money households have available and which public services the state can continue to fund.
As the election approaches, Republicans and Democrats are offering different answers to the affordability problem. The debate is no longer just about whether New Mexicans need financial relief, but how that relief should be delivered, who should receive the most help, and how the state can pay for it.
