BY DUNCAN HAMMON
I have a few suggestions for Rep. Christine Chandler for the upcoming legislative session.
1) A significant portion of the budget windfall should be used to prepay the government’s obligations to the public employees retiree funds. This would serve two purposes. First, the return on the investment would increase the effective contribution and second, it would provide a cushion the next time the state’s income drops. However, it must be clear that this does not represent employee contributions. The recent pay raise for government employees increased the pension obligations immediately and will not be recouped by increased contributions in the future. This is a great opportunity to get the funds on sounder footing.
2) The exemption for Social Security income from income tax appears to include a cliff. From what I’ve read, a one dollar increase in income could result in thousands in additional taxes – a 10000% marginal tax rate if you will. It’s a simple matter to phase in the taxation of SS benefits over something like 10000 or 20000 dollars of income. As it stands there is the potential of a significant penalty if a little too much is withdrawn from an IRA during a personal emergency or you win a little at a casino. It also is a large incentive to underreport income to avoid the cliff.
3) Eliminate the marriage penalty for Social Security. The exemption for married couples should be twice that for singles.
The final topic does not relate to specific agenda items. The statement that “trickle-down economics” doesn’t’ work is demonstrably false. John F. Kennedy stated that high tax rates were a problem and that “a rising tide floats all boats.” From 1940 to 1982 when the top marginal tax rates were above 70%, taxpayers in the bottom 95% of incomes paid 6% of GDP in income taxes. The share paid by the top 1% was about 1 ½ % of GDP. When the top marginal rate was reduced to less than 40% from 1982 to 2012 the share of taxes paid by the bottom 95% of incomes fell to about 3% of GDP and for the top 1% rose to about 3% of GDP and the economy boomed. Massachusetts reduced their income tax rates and also reaped great economic benefits and more income for the state government. New Mexico has economic problems but low tax rates isn’t one of them. History has shown that high tax rates does not equal high revenues, in fact the opposite is true. I know that “Tax the Rich” and “Make Them Pay Their Fair Share” are rallying cries for progressives but it is clearly only intended to punish the successful. It does not increase government revenues.