When we think about all the public amenities that our tax payments support— like roads, education, parks, public safety and more —it’s a wonder we don’t celebrate Tax Day.
These amenities make our modern economy and quality of life possible. Since we all benefit, everyone should help pay for them – but we know that too often those with powerful connections are able to manipulate the tax code to their benefit.
The New Mexico Legislature recently made changes to the state’s tax code that eliminated some of the benefits for the well-connected. Legislators also made big improvements that will help make our upside-down tax code fairer for hard-working families earning moderate wages.
When you filed your tax return this year, you may have noticed some changes. Maybe you got a smaller refund than usual or you owed more in state taxes.
So what happened to the fairness measures that the legislature just passed? Unfortunately, these changes won’t impact your state tax return until you file next year.
The only tax law changes that impacted your return this year were from the tax package enacted by the federal government in 2017.
While there were both winners and losers in this federal reform — spoiler alert: the biggest benefits went to the wealthiest — many New Mexico families may have had a higher tax bill or gotten a smaller refund because the federal package eliminated exemptions for dependents. This was a problem when families with multiple children filed their state taxes.
One of the changes the legislature made during the 2019 session was a “fix” for this. Starting next year, families with more than one child will be able to take a $4,000 deduction for each child beyond the first.
This will save New Mexico families an estimated $28 million in state income taxes.
Another change New Mexicans will see in 2020 is a substantial increase in the Working Families Tax Credit. Now worth 10 percent of the federal Earned Income Tax Credit, the value will rise to 17 percent of the EITC next year.
The EITC is one of the most effective anti-poverty programs ever enacted. This increase in the state credit will put an additional $40 million into the hands of families getting the EITC.
In Sandoval County alone, working families will receive an additional $1.9 million — and studies show they will spend most of it right in their local communities on necessities like groceries, rent and car repairs.
So if your tax return had some unwelcome surprises this year, take a deep breath. It’s likely to improve next year, and it’s definitely going to improve for New Mexico’s working families.
And that — along with the fact that every Tax Day means we’re able to pay our teachers and firefighters, fix our potholes and invest in libraries and parks — is a reason to celebrate today.
(James Jimenez is the executive director of New Mexico Voices for Children, which has the mission of improving well-being and equity for the state’s children, families and communities in health, education and economic security by advocating for public policies and providing research.)