from the New Mexico News Connection - A statewide news service for New Mexico
Santa Fe, NM – A new study says New Mexico could immediately raise over 10 billion dollars by inverting its tax structure; that is, taxing highest incomes at the current rates of the lowest earners – and vice versa. The report, “Flip It to Fix It: An Immediate, Fair Solution to State Budget Shortfalls,” comes from United for a Fair Economy.
As New Mexico lawmakers consider cuts to balance the state budget, a new study says there’s a simpler – and far less painful – way to turn deficits into surpluses. It suggests flipping state tax structures, so the wealthiest pay the rates that low-income wage earners are now paying – and vice versa. That would immediately wipe out New Mexico's 160 million budget shortfall for the new fiscal year, according to report author Karen Kraut, an analyst with United for a Fair Economy. She says today’s political culture has contributed to the misperception that the wealthy pay their fair share – if not more – in taxes. She thinks that’s because tax debates tend to center on the federal income tax, "Pretty much every other tax – especially taxes at the state and local level – hit the lower- and middle-income folks a lot harder than the wealthy."
Kraut says the top 20 percent of taxpayers in New Mexico pay 6.2 percent of their income in state and local taxes, whereas the lowest-income taxpayers pay 10.8 percent of their income. Reversing those figures, she says, would raise over 10 billion dollars for the state's coffers.
The report says it isn't just New Mexico that would benefit from progressive taxation. Inverting tax structures would bring states across the country 490 billion dollars in new revenues, according to Kraut, "Every single state in the nation has a tax system that is regressive, that taxes the lowest-income families at a greater share of their income than the most wealthy families."
According to Kraut wealthy people should not fear progressive taxation...because with greater fairness comes greater overall economic stability and growth, "When low- and middle-income people have more money to spend in the economy, they purchase things, and the economy gets revved up, and the people who own businesses – and the people who invest in the stock market – gain from those economy-enhancing activities."
Kraut says there’s been a redistribution of wealth over the past three decades because of increasingly regressive tax systems. That's one reason that top incomes have soared, while lower incomes have stagnated.