Reforming New Mexico’s Tax Code Principles and Options for Success

Most economists agree that the purpose of taxation is to fund public-sector services – such as law enforcement and infrastructure – that the private sector cannot or will not provide. But creating a tax structure that extracts enough revenue to sustain government’s duties while minimizing distortions to the market process is a challenge.

Good tax policy avoids altering the natural incentive structure of households and firms. Independent buying and selling, facilitated by the use of accurate market prices, is the best way to allocate a society’s resources and ensure a well-balanced, welfare-maximizing economy. That’s why tax reform in New Mexico should strive for greater efficiency, equity, and simplicity.