ALBUQUERQUE — The state of New Mexico returned $132 million to 239,000 households this year via the state’s new Child Tax Credit. The state CTC is the latest in a series of tax credits that New Mexico has enacted, increased or expanded to help New Mexicans who earn the lowest incomes. That’s one of the data points in a new report, “How Tax Credits Impact Child Poverty and Well-being,” which is the second in the “From Poverty to Prosperity” series.
“We’ve long known that refundable tax credits are one of the most effective ways to fight poverty because they return money directly to families who know best how to address their family’s specific needs,” Gabrielle Uballez, executive director of New Mexico Voices for Children, which released the report on Dec. 18, said. “New Mexico has made so much progress, that it’s now ranked ninth in the nation for tax fairness.”
The $132 million CTC lowered the tax bill for those families who owed personal income taxes. Those families who did not owe any taxes received the balance of the credit as a check, because the tax credit is refundable. In order for income tax credits to help those who earn low incomes, they must be refundable. The state’s CTC was designed to help those families earning the lowest incomes the most, with credit amounts increasing as incomes decrease.
Federally, the two most generous and commonly claimed tax credits for working families earning low incomes are the Earned Income Tax Credit and the CTC. Together, these credits helped lift 6.4 million people out of poverty nationwide in 2023. This was, in part, because the federal CTC was increased and also made refundable during the pandemic. In New Mexico, more than 450,000 kids – or 95% of the child population – benefited from the federal CTC expansion, which lifted an additional 32,000 children out of poverty during the pandemic.
New Mexico has a state-level EITC called the Working Families Tax Credit. That credit returned $123 million to 196,000 households for tax year 2023. It is only available to people who work, and most of the benefit goes to families with children. New Mexico’s other anti-poverty tax credit – the Low-Income Comprehensive Tax Credit – is available to those who aren’t working, such as seniors. It returned $44 million to 305,000 households for tax year 2023.
“Research has shown that tax credits do more than just reduce poverty for children,” Uballez said. “Studies show that they lead to long-term improvements in health and higher earnings in adulthood. The EITC also improves school performance and increases college attendance rates.”
State and federal tax credits like the CTC are only part of the reason that New Mexico’s child poverty rate is better than the national average when it is determined using the supplemental poverty measure. Under the SPM, child poverty in New Mexico is less than 9%, while the national average is 10%. Under the official poverty measure, the state’s child poverty rate, at 27%, is the highest in the nation (which is 15% on average). Both poverty measurements come from the U.S. Census Bureau and determine poverty rates based on different criteria. The most recent SPM child poverty rate comes from data collected from 2021-2023, so the new state CTC is not yet counted in that 9% rate.
