Thursday, January 21, 2010

NM: A temporary tax hike it?

Governor Richardson seems adamant in asserting that whatever tax hikes he pushes through during the 2010 legislative session will be "temporary." This promise from a lame-duck Governor is ridiculous on its face and is an impossible promise. Of course, this is not where the silliness stops. Richardson will likely ask legislators to consider "sin" taxes on soda pop, cigarettes, and junk food. This puts the next governor of New Mexico in a tough spot. Even if the economy has improved a bit by 2013, the next governor will have to "cut" taxes on the politically-unpopular tobacco, soda, and junk food industries. There is no doubt that government bureaucrats will always have a "better" use for our money than cutting taxes on habits like drinking soda, eating junk food, and smoking. But what supporters of these tax hikes and the media won't tell you is that all of these tax hikes are highly regressive and disproportionately impact the poor. For example, tobacco taxes are highly regressive and, if they are increased, will disproportionately harm working class New Mexicans. According to Congress's Joint Committee on Taxation, more than 2/3 of all federal tobacco taxes come from those earning less than $40,000 per year (a pattern that also applies to state-level tobacco taxes). The poor also spend 2.5 percent of income on tobacco products versus 0.2 percent for the top 20 percent. Soda and so-called "junk food" taxes are also highly regressive. Worse, they would create an administrative nightmare. After all, potato chips might be a junk food, but are the slightly healthier Sun Chips? How about the fat-free potato chips that have come on the market in recent years? Things can get really complicated and more

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