Let New Mexican's keep more of their money!!!

This proposal advocates for the elimination of New Mexico’s state income tax to position the state as a national leader in economic competitiveness, job creation, and population growth. By shifting toward a consumption-based revenue model and reducing reliance on income taxation, New Mexico can attract new residents, retain talent, stimulate investment, and empower working families.

I. Background

New Mexico currently imposes a progressive personal income tax with rates ranging from 1.7% to 5.9%. While income tax has historically been a steady source of revenue, this structure increasingly places a burden on working families and discourages economic growth, especially in today’s mobile economy.

Nine states—including Texas, Florida, and Tennessee—have no personal income tax. These states have consistently outperformed national averages in job creation, population growth, and small business formation. New Mexico is uniquely positioned to follow their lead.

II. Rationale for Elimination

1. Economic Competitiveness
Eliminating the income tax would send a strong signal that New Mexico is “open for business.” Businesses and entrepreneurs are more likely to relocate or expand in states with low or no income tax, where they can offer more competitive salaries and keep more of their profits.

2. Population Retention and Growth
New Mexico continues to face outmigration, especially among young professionals and retirees. Removing the state income tax would create a powerful incentive for individuals to stay, return, or relocate to the state.

3. Boost to Working Families
Eliminating the income tax would immediately increase take-home pay, allowing New Mexicans to better keep up with inflation and rising costs. A family earning $50,000 a year would see hundreds of dollars in relief annually.

4. Administrative Efficiency
Eliminating income tax would reduce the need for a large bureaucratic infrastructure dedicated to enforcement and compliance, saving taxpayer dollars and reducing paperwork burdens on individuals and small businesses.

5. Adding Stability through Diversification

Eliminating income tax would promote more private sector growth. Between attracting larger corporations and encouraging small business growth and expansion, this would decrease New Mexico's reliance on the oil and gas industry. Oil and gas revenue is volatile, subject to global markets. Diversification would provide stability for New Mexico in the event of a downturn in the oil and gas industry. 

III. Fiscal Strategy and Revenue Replacement

To responsibly phase out the income tax while maintaining essential services, the state can consider a combination of the following:

• Dip into the states large general fund, ensuring a fair and predictable revenue stream.

• Limiting growth in government spending through responsible budgeting practices.

• Enhancing economic growth, which leads to increased revenue through property, sales, and business taxes as the state economy expands.

• Increasing tourism and in-migration, both of which expand the tax base without raising rates.

Additionally, New Mexico has benefited from strong energy revenues and federal transfers, which provide a buffer during the transition period.

IV. Economic Impact Estimates

Studies from the Laffer Center, Cato Institute, and other economic policy groups show that states with no income tax grow their economies nearly twice as fast as high-tax states. If New Mexico followed a similar path, it could see:

• 20–40% more new business formations over a 5-year period

• Thousands of new jobs created through increased capital investment

• A reversal in net population loss

V. Conclusion

Eliminating New Mexico’s state income tax is a bold, forward-thinking reform that would put more money in people’s pockets, attract investment, and unlock economic opportunity statewide. With responsible budgeting and a gradual transition, New Mexico can ensure fiscal stability while transforming into a magnet for growth and prosperity.

Let’s make New Mexico a no-income-tax state — and a place where people and businesses come to thrive.