Poverty Drops Significantly in New Mexico After Tax Changes
Before dawn at the state fairgrounds in Albuquerque, the first cars lined up. By 9 a.m., vehicles stretched in a winding line for a food distribution event. It was just a week before Christmas, and thousands of families arrived to collect groceries that would help them through the holidays.
Scenes like this are all too common in New Mexico, where many residents struggle with food insecurity, lack of affordable housing, inadequate healthcare, and low-paying jobs. However, beneath the surface of these persistent struggles, there are signs of gradual change.
Recent shifts in state tax policy are beginning to alleviate some of the burdens for low-income families. According to federal data released last fall, the share of New Mexicans living in poverty has seen one of the most significant declines in the nation over the past decade, when factoring in government benefits.
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The Role of Tax Policy
This improvement coincides with a series of progressive changes to New Mexico’s tax code. Lawmakers have enacted and expanded tax credits and rebates, returning hundreds of millions of dollars annually to working families. These efforts have transformed the state’s tax structure, making it one of the most progressive in the country. The poorest residents now pay a smaller share of their income in taxes than any other group.
Arloc Sherman, vice president of the Center on Budget and Policy Priorities, highlighted New Mexico’s progress: “The state tax system is a powerful tool, and New Mexico in recent years has been a leader in using it to help keep more families above the poverty line.”
Decade of Transformation
A decade ago, New Mexico had one of the highest poverty rates in the nation, with 22% of residents living below the poverty line. Under the supplemental poverty measure, which adjusts for local living costs and government benefits, 17.1% of New Mexicans were impoverished, ranking among the worst in the country.
Today, those numbers have significantly improved. The supplemental poverty rate has dropped to 10.9%, translating to 120,000 fewer New Mexicans living in deprivation. This represents one of the most substantial reductions in poverty nationwide.
Legislative Action Driving Change
The turnaround began with an economic boom fueled by oil and gas production in southeastern New Mexico, resulting in record-breaking budget surpluses. This financial windfall, combined with a wave of progressive lawmakers elected in 2018, set the stage for sweeping tax reforms.
- 2019: Lawmakers began restructuring the tax system to ease the burden on low-income residents. They increased the Working Families Tax Credit and expanded benefits for working parents.
- 2021: Additional tax credits and rebates were introduced, including increases to the Low-Income Comprehensive Tax Rebate and a constitutional amendment guaranteeing early childhood education.
- 2022: Social Security income was exempted from taxes, and a new Child Tax Credit was created, offering up to $600 per child annually.
- 2023: Legislators further revised income tax rates and lowered the gross receipts tax, which disproportionately impacts low-income residents.
These measures have propelled New Mexico from one of the most regressive tax structures in 2015 to the 8th most progressive by 2024, according to the Institute on Taxation and Economic Policy.
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The Reality for Families
Despite these advances, many low-income residents still face significant challenges. For Albuquerque business owner and mother of seven, Kim Obregon, the cost of living outweighs any gains from tax credits. She spends half her income on a small apartment while trying to keep her flower shop afloat amid setbacks like vandalism and rising housing costs.
“I can’t honestly say whether or not the tax credits have been helpful,” Obregon said, noting that her financial struggles often overshadow any government assistance.
Housing costs, in particular, have surged by 56% over the past five years, according to the Federal Housing Finance Agency. For many families like Obregon’s, the impact of these increases is compounded by the rising cost of basic necessities.
Looking Ahead
House Speaker Javier Martinez acknowledges the progress but insists there is much more to do. He emphasized the importance of initiatives like “baby bonds,” a program to create savings accounts for every New Mexican at birth, and proposed legislation to double the Child Tax Credit for families with young children.
“We’re up against centuries of policies that have ignored our communities,” Martinez said. “Now that we’re in a position to make a difference, we’re not going to waste this opportunity.”
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While the road ahead is challenging, the changes to New Mexico’s tax system provide a foundation for continued progress. For families like Obregon’s, meaningful reforms and targeted support could eventually make scenes like the holiday food line a thing of the past.