BY DUNCAN HAMMON
I have some suggestions for Rep. Christine Chandler for the next legislative session.
1) A significant portion of the fiscal windfall should be used to prepay government obligations to public employee pension funds. This would serve two purposes. First, the return on investment would increase the effective contribution and second, it would provide a cushion the next time government revenues fall. However, it should be clear that these are not employee contributions. The recent wage increase for government employees has increased pension obligations immediately and will not be recouped by increased contributions in the future. This is a great opportunity to get the funds on a more solid footing.
2) The exemption of Social Security income from income tax seems to include a cliff. From what I’ve read, a one dollar increase in income could lead to thousands in additional taxes – a 10,000% marginal tax rate if you will. It’s a simple matter of phasing in the taxation of SS benefits on something like $10,000 or $20,000 of income. As it stands, there is a risk of a significant penalty if a little too much is withdrawn from an IRA in a personal emergency or if you win a little at a casino. It is also a great incentive to under-declare income to avoid the precipice.
3) Eliminate the marriage penalty for Social Security. The exemption for married couples should be double that for singles.
The last topic does not relate to specific agenda items. The claim that the “trickle down economy” does not work is patently false. John F. Kennedy said that high tax rates were a problem and that “a rising tide floats all boats”. From 1940 to 1982, when top marginal tax rates exceeded 70%, taxpayers in the bottom 95% of incomes paid 6% of GDP in income taxes. The share paid by the top 1% was about 1½% 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 around 3% of GDP and for the top 1% , it rose to about 3% of GDP and the economy exploded. Massachusetts reduced its income tax rates and also reaped great economic benefits and more revenue for the state government. New Mexico has economic problems, but low tax rates are not one of them. History has shown that high tax rates do not equal high incomes, 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 they are clearly only meant to punish those who succeed. It does not increase government revenue.