{"id":28392,"date":"2011-04-15T08:22:47","date_gmt":"2011-04-15T14:22:47","guid":{"rendered":"http:\/\/www.nmpolitics.net\/index\/?p=28392"},"modified":"2011-04-15T08:22:58","modified_gmt":"2011-04-15T14:22:58","slug":"it%e2%80%99s-not-how-much-you-pay-%e2%80%93-it%e2%80%99s-how-much-you-make","status":"publish","type":"post","link":"https:\/\/nmpolitics.net\/index\/2011\/04\/it%e2%80%99s-not-how-much-you-pay-%e2%80%93-it%e2%80%99s-how-much-you-make\/","title":{"rendered":"It\u2019s not how much you pay \u2013 it\u2019s how much you make"},"content":{"rendered":"
\"\"<\/a>

Gerry Bradley<\/p><\/div>\n

Over and over, every April, we are informed by the media that a small number of income tax filers pay a large share of income tax, as though this were remarkable or even alarming.<\/p>\n

What we don\u2019t hear much about is why some pay more than others. The answer is quite simple: They receive most of the nation\u2019s income. Income taxes are, by design, somewhat proportional to income. If you have more, you pay more, or at least that\u2019s how it\u2019s supposed to work.<\/p>\n

Here\u2019s another way of looking at it: If a small percentage of Americans receive a very large percentage of all the income, then a very large percentage of Americans must divide up what\u2019s left over. The gap between how much money goes to the few at the top and how little goes to the many at the bottom is called income inequality.<\/p>\n

And over the last several years it has gotten much, much worse. It\u2019s only right, then, that the fortunate few pay their fair share in taxes.<\/p>\n

Income inequality in NM<\/h3>\n

Here\u2019s how income inequality looks in New Mexico. In 2008, more than 70 percent of New Mexico tax payers earned just 29 percent \u2013 less than one-third \u2013 of all state income, according to the IRS. On average, this large majority of households earned just over $18,000 a year.<\/p>\n

So who got most of the state\u2019s income? More than half of it (54 percent) went to just 16 percent of New Mexicans. But even within the top 16 percent, the income distribution remains highly skewed. Almost one-fifth of total income in New Mexico went to less than 2 percent of all filers.<\/p>\n

We\u2019ve also heard about Americans who don\u2019t pay any federal income tax at all. Many of these folks are of very modest income \u2013 retirees, working families, and the disabled. What we don\u2019t hear about are all the taxes that low-income people actually do pay. No one in America escapes taxation entirely, and this is particularly true for the poor.<\/p>\n

Like many states, New Mexico taxes the sale of most goods and services. Taxes levied on purchases fall disproportionately on lower-income people because they have no choice but to spend, and thus be taxed on, every cent they earn.<\/p>\n

Upper income households can divide their income between spending, saving and investing. For example, a New Mexican earning less than $16,000 will spend, on average, almost 11 percent of his or her income on state and local taxes. But a New Mexican with income upwards of $150,000 will pay just 6 percent in taxes.<\/p>\n

Payroll taxes \u2013 deductions for Social Security and Medicare \u2013 are paid by everyone who gets a paycheck. But payroll taxes do not treat all wages the same. They cut off at $106,000, meaning that middle- and low-wage earners pay tax on everything they earn, while high-wage earners only pay tax on the first $106,000, everything over that is payroll-tax free.<\/p>\n

People with more pay more<\/h3>\n

All wages are not equal, nor is all income. You\u2019ve heard the saying \u201cit takes money to make money.\u201d Not only is that true, but investment income (the kind of money you make with other money) is actually taxed at a lower rate than money earned from actual work.<\/p>\n

In New Mexico, half of all capital gains \u2013 the profit from the sale of assets \u2013 is excluded from income tax entirely. And most of the capital gains income in New Mexico \u2013 80 percent \u2013 was reported by filers with adjusted gross incomes over $200,000.<\/p>\n

Thus, the lion\u2019s share of this generous tax preference went to a tiny minority of very fortunate taxpayers.<\/p>\n

So, people with more money sometimes pay more taxes. This is fair, but is it that remarkable?<\/p>\n

Bradley is research director for New Mexico Voices for Children<\/a>, a nonpartisan, nonprofit organization advocating for policies to improve the health and well being of New Mexico’s children, families and communities.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Over and over, every April, we are informed by the media that a small number of income tax filers pay a large share of income tax, as though this were remarkable or even alarming. It’s fair, but is that remarkable?<\/p>\n","protected":false},"author":1811,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1192,16],"tags":[118,107,116],"class_list":["post-28392","post","type-post","status-publish","format-standard","hentry","category-commentary","category-guest-columns","tag-economy","tag-roundhouse","tag-washington"],"_links":{"self":[{"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/posts\/28392","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/users\/1811"}],"replies":[{"embeddable":true,"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/comments?post=28392"}],"version-history":[{"count":0,"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/posts\/28392\/revisions"}],"wp:attachment":[{"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/media?parent=28392"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/categories?post=28392"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/tags?post=28392"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}