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Legislature is transforming state tax structure to better serve residents, businesses


While conversations on tax reform have yet to result in a comprehensive plan that wins the support of a

majority of the state’s 112 lawmakers, bit by bit, we are reshaping the state’s tax structure into one that better serves New Mexicans and New Mexico businesses.

This year, that conversation should include the idea of eliminating or greatly reducing the rates of the personal income tax. I can almost hear the collective gasp, but consider this: The fastest growing states and communities have no income tax and, hoping to gain an edge in the competition to attract businesses, more states are going that direction. Mississippi legislators are considering a plan to cut its top rate to 4 percent by 2026, Louisiana cut its top rate to 4.25 percent last year, and Arkansas will take its top rate down to 4.9 percent by 2025.

Businesses are attracted to tax stability. More than the periodic tax rebates popular among individuals, businesses want to know what they’re working with long term. They want a clear picture of what the tax

environment will be next year and the year after that. While the personal income tax doesn’t directly affect the taxes paid by a business, it does affect its owners and employees and influences their decision

on where to locate.

New Mexico’s tax environment is getting more stable, providing room for reform efforts. While revenues are still buffeted by the roller coaster energy industry, the Legislature has taken steps to stabilize long-run planning, with the creation of a more robust rainy-day fund and a commitment

to leave hefty balances in reserves. That greater stability allows us to build budgets and tax reform on a more reliable foundation.

The idea of reducing or eliminating personal income taxes is not without its challenges. At about $2 billion a year, revenue from the personal income tax makes up a quarter of the general fund and a third

of the three-legged stool that supports state revenues. The state can’t eliminate the tax without making up at least some of the revenue somewhere else.

Patty Lundstrom, a Democrat, has represented District 9 in the New Mexico House of Representatives since 2001. The district includes portions of McKinley and San Juan counties. Lundstrom lives in Gallup, where she serves as executive director of the Greater Gallup Economic Development Corporation.