New Mexico’s Historically-Poor Tax Climate Has Caused Citizens to Flee

Is New Mexico moving in the right direction economically-speaking or are we running in place? According to recently-released Census data, New Mexico is becoming an increasingly popular destination for people to move to from other states. In fact, about 4.1 percent of New Mexicans moved here from another state within the last year which puts us at No. 9 in the nation in percentage of residents who have moved from another state within the previous year.

However, the new Census data provide only a limited picture of migration patterns. They do not show, for example, how many are migrating out of New Mexico, nor do they show whether young, educated people are moving to the state or if in-migrants are primarily retirees who, having made their money elsewhere, are looking for a low-cost, low-property tax place to settle down.

To answer some of these questions slightly further back, the Rio Grande Foundation studied more complete Census data from 1995-2000 to determine who was coming and going to and from New Mexico and whether it was economic policies, climate, or some other factors that spurred migrations. We also studied the factors that determined New Mexico’s relative attractiveness to migrants from other states.

Unfortunately, the picture is not as pretty as we might hope. In fact, New Mexico suffered a net loss of citizens to other states during the late 1990s, not to mention, a greater net loss of young, single, college educated people than any other western state (defined as Rocky Mountains or further west). More importantly, through detailed analysis of Census data and Tax Foundation data on state tax burdens, the study authors found that the state’s heavy tax burden was primary reason New Mexicans left.

While New Mexico lost migrants to other states, Colorado, like the rest of New Mexico’s neighbors, gained significant numbers of migrants during this time period. In fact, while New Mexico lost significant numbers of young, educated, and single residents to other states, Colorado gained more than any state but Nevada. Why might this occur? One major reason is Colorado’s Constitutional tax limitation called the Taxpayer’s Bill of Rights which strictly limited government spending and taxation, thus creating one of the best state economies in the nation.

Nevada, another state with a very favorable tax climate – among its biggest draws is the fact that it has no income tax – was another favored migration destination. In fact, Nevada gained more citizens from other states and more young, single, and educated people (as defined by the Census), than any other state in the nation.

So, what can New Mexico do to catch up to its neighbors? Well, the recent income tax cuts – begun in 2003, after the Census data were collected – were a good start. Unfortunately, other tax and fee increases may have offset those benefits. In the absence of new data, it is hard to tell the out-migration, particularly of young, single, and educated citizens, is continuing or whether New Mexico’s tax climate has improved enough to stem the tide.

Rather than waiting for the next round of Census data to come out, New Mexico’s elected leaders should consider ways to further improve the state’s tax climate by using plentiful revenue to further reduce income tax rates and/or adopt strong Constitutional protections for taxpayers similar to Colorado’s. New Mexico is a great place. Not only would it not hurt to share; a rising economic tide in the state would get more New Mexicans get out of poverty.

Paul Gessing is the President of New Mexico’s Rio Grande Foundation.  The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.