Policy Recommendations
- Fiscal Trim spending across the board and reduce public employment. Cut the gross receipts tax.
- Regulatory Promote tort reform since the state performs poorly on lawsuit freedom, creating a drag on its economy.
- Personal Enact a generous private tax-credit scholarship program.
Analysis
New Mexico has long had far more personal freedom than economic freedom, but it has never fully turned it around economically despite some movement in the right direction on fiscal policy—in absolute terms since 2000 and in relative terms since 2019. It is now 39th on fiscal policy after being stuck in 48th place for years, with a 36th-place ranking on regulatory policy. With a 41st-best score on economic freedom as a whole, its 5th-best ranking on personal freedom can’t save it, though at least it is no longer in the bottom 10 states in overall freedom.
New Mexico’s overall tax burden of 9.1 percent of adjusted personal income is below the national average of 10.1 percent. State taxes came in at 5.7 percent, which is below the national average and below a recent high of 6.3 percent in FY 2019. Local taxes have risen from 2.8 percent of income in FY 2001 to 3.4 percent in FY 2021. That growing fiscal decentralization does little for choice in government, however, as the state has fewer than one competing jurisdiction per 100 square miles. Government debt ballooned during the Great Recession but has come down all the way to 15.0 percent of income. Public employment is still abnormally high, as is government consumption. Cash and security assets are robust.
New Mexico has consistently slid on land-use freedom and is now below average. Zoning regulations have significantly tightened over time, and the state has implemented relatively strict renewable portfolio standards. It implemented eminent domain reform long ago. The state has had a minimum wage for some time, but it was not extremely high until 2018. There is no right-to-work law. Health insurance freedom is low because of costly mandates and bans on managed care gatekeeping models. In 2013–14, the state passed a telecommunications deregulation bill, but it has not implemented statewide video franchising. Occupational freedom is average. The extent of occupational licensing skyrocketed between 2006 and 2009, then jumped again in 2016. Nurses enjoy broad scope-of-practice freedom. Insurance freedom has been fairly high since reforms were enacted in 2009–10 and got better again in 2020 by moving to no filing requirements. New Mexico has no certificate-of-need law for hospital construction, but it did implement an anti-price-gouging law in 2020. Otherwise, cronyist regulation is limited, other than licensing for moving companies and a ban on direct-to-consumer auto sales. The civil liability system is much worse than average, and the state has done little to address the problem.
New Mexico’s personal freedom is where it stands out from the pack, at number five. It has solid criminal justice policies, coming in at 13th. Victimless crime arrests, drug and nondrug, are quite low, as are incarceration rates. The state’s asset forfeiture law is the best in the country, since putting limits on equitable sharing in 2015. Cannabis, alcohol, and travel freedoms are all strong suits for New Mexico. Marijuana was legalized in 2021. Gambling freedom is limited, but sports betting is legal. From 2013 to 2017, physician-assisted suicide was legal and then again since 2021, but that is a tiny part of our index. The state is one of just two to have both a broad religious freedom restoration act and a broad equal rights amendment (Connecticut is the other). Tobacco and educational freedoms are weak spots in a top state. Students are required to go to school for 13 years, the most in the country, and the state has no choice programs apart from public school open enrollment. Cigarette taxes are high, and smoking bans are extensive. New Mexico also performs weakly on gun rights, coming in 31st. The state does well on open carry, but it still has no permitless concealed carry and requires universal background checks as of 2019. The state has no motorcycle helmet law.