Proposed Bill Expands Working Families Tax Credits: Puts More Money in Economy
Santa Fe – Consumer spending, things like dining out or buying a new pair of pants, accounts for almost 70% of our economy. So it follows that putting more money into the hands of people who will spend it would have a big and immediate impact in growing a slow economy like ours.
It’s not a new idea – George W. Bush did it in 2008 by sending out $100-billion in tax rebates to households. The non-profit, non-partisan National Bureau of Economic Research examined the evidence. According to the Wall Street Journal:
They find that, on average, households spent between 12% and 30% of their rebates on nondurables — things that don’t last for more than three years — and another chunk on cars and other durables, bringing the amount spent (as opposed to saved or used to pay down debt) to between 50% and 90% in the six months following receipt of the stimulus. Older, low-income and home-owning recipients were particularly likely to spend the money, they found. They figure that the stimulus, derided by some other economists as a waste of money, added about 1.3% to 2.3% to inflation-adjusted consumer spending in the second quarter of 2008, at an annual rate, and between 0.6% and 1.0% in the third quarter.
Bottom line: giving money to people who will spend it, particularly those who are low-income or own homes, spurs growth.
At least one proposal before the New Mexico state legislature, Senate Bill 109, proposes to do just that by expanding the Working Families Tax Credit.
In 2009, more than 220,000 working New Mexico families shared $489.4 million in refunded credits , averaging $2,215 each, according to a report by the National Council of State Legislators.
And that amount was at the current 10% rate. New Mexico reduced the credit, and thus the amount of money available for our lowest income residents to spend on things like food, school supplies and rent, by $40 million in 2007. Since then, the cost of living has increased almost 10%.
Senator Jacob Candelaria, sponsor of the bill, told us this by email:
“Recent economic reports show that New Mexico has the highest rate of income inequality in the country–this shocks the conscience, and is an immediate call to all of us to take bold action on behalf of New Mexico’s working families…”The state’s working families tax credit is an extremely effective anti-poverty program for children, improving their chances for succeeding in school and in life.”
State Representative Ed Sandoval is co-sponsoring the legislation in the House. Candelaria also says he already has seven co-sponsors in the Senate: – Sen. T. Keller, Sen. H. Morales, Sen. W. O’Neill, Sen. L. Lopez, Sen. Maj. Leader M. Sanchez, Sen. M. Padilla and Sen. P. Wirth.