OPINION: Ridding state of corporate income tax would undo years of progress

New Mexico lawmakers have made great strides in improving the state’s tax system over the past several years. As a result of various policy changes — including the expansion of the Working Families Tax Credit, the creation of a state Child Tax Credit, and tax increases on investment income and high-earning residents — New Mexico has demonstrated a commitment to prioritizing communities over out-of-state corporations.

Our progress is measurable. According to state rankings through the Institute on Taxation and Economic Policy’s Tax Inequality Index, New Mexico jumped 18 spots since 2018, the biggest positive change of any state. Through a combination of more equitable taxation and deep community investment, New Mexico’s lawmakers are setting an example for states across the country.

And yet, despite this important progress, there is still work to be done for our families, workers and children. To do so, we need to strengthen our tax system rather than limit our options for progressive revenue.

An Oct. 26 op-ed in the Santa Fe New Mexican, “New Mexico should eliminate corporate income tax,” argued that New Mexico should eliminate its corporate income tax. This is an ill-advised proposal that has long been debunked. More importantly, it is a far cry from the policies that should be on the table today and in the years to come. Lawmakers should continue making tax changes that ensure the state provides the vital services New Mexicans depend on.

Eliminating the corporate income tax would result in an estimated $325 million loss in public resources, a number that would grow each year.

Given New Mexico’s current fiscal reality, we have the flexibility to thoughtfully choose our path forward. Doing away with the state’s corporate income tax would be a setback, undoing years of progress. It would narrow, rather than diversify, tax revenues that fund our shared priorities and ensure that investments in services like education and public safety are adequately, sustainably, and equitably funded. Ultimately, it would worsen New Mexico’s tax system, asking more of those least able to pay.

Corporate tax cuts exacerbate income and racial inequality. They primarily benefit corporate shareholders, a group that is wealthier than average and geographically dispersed. Most Americans see little benefit from corporate tax cuts, while the richest 20% of households and foreign investors get the lion’s share. In fact, a whopping 40% of corporate shares are held by foreign investors.

Policies enacted by our lawmakers should better support the lives of New Mexico’s working families.

Out-of-state corporations benefit from the roads, schools, first responders, and health care that New Mexico provides. The corporate income tax is the only tax designed to make these out-of-state corporations pay their fair share of the cost of providing these services.

Just like New Mexicans pay taxes on our incomes, out-of-state corporations should pay taxes on the profits they realize in our state. Anything in the other direction is not a long-term solution and a decision we cannot afford to make.

State. Sen. Peter Wirth, D-Santa Fe, is the majority floor leader of the New Mexico Senate.