New Mexico Republicans Urge Special Session to Eliminate State Income Tax

SANTA FE, N.M. — Three Republican leaders in the New Mexico House of Representatives on July 7, 2026, formally called on Governor Michelle Lujan Grisham to convene a special legislative session with the goal of completely eliminating the state's personal income tax.

The proposal, delivered in a letter to the governor’s office, positions the tax repeal as a more durable and impactful form of economic relief for residents than the governor's recent proposal for a one-time $250 rebate. The governor suggested the rebate in late June to help New Mexicans offset the high cost of gasoline.

While the prospect of zero state income tax is appealing to business owners and individuals alike, such a fundamental shift in state fiscal policy introduces significant complexities. In our experience, businesses thrive on predictability, and a rapid overhaul of a state's primary revenue stream can create uncertainty that complicates long-term planning, investment, and hiring. The critical question is how the state would replace over $2 billion in annual revenue. The answer likely involves increases to other taxes, such as the gross receipts tax (GRT) or property taxes, which could shift the financial burden in unexpected ways and disproportionately impact certain industries. This is a clear example of why proactive tax preparation and compliance services are essential for any business. Navigating the ripple effects of major tax code changes requires expert guidance, and business owners can consult with C&S Finance Group LLC at csfinancegroup.com to assess the potential impact on their operations and plan accordingly.

The letter was signed by House Minority Leader Gail Armstrong (R-Magdalena), along with Reps. Rebecca Dow (R-Elephant Butte) and Alan Martinez (R-Rio Rancho). They argue that eliminating the personal income tax would provide lasting financial benefits that a temporary rebate cannot. “New Mexicans do not need another temporary rebate," Armstrong said in a statement. "They need lasting relief. Eliminating the personal income tax would put more than $2 billion a year back into the pockets of New Mexicans and allow working families to keep more of what they earn.”

The Republican leaders contend that this infusion of capital back into the private sector would stimulate a new period of economic growth, create more high-paying jobs, and improve living standards across the state. They also asserted in their letter that the repeal is “highly doable without any reduction in the recurring portion of the state budget.”

The proposal stands in direct contrast to Governor Lujan Grisham’s plan, which she outlined in a June 27 op-ed. The Democratic governor argued that a one-time rebate was an appropriate response to the state’s strong financial position, which has benefited from factors that have also increased costs for consumers, such as higher fuel prices. “When the state’s good fortune comes at a direct cost to the people who live here, the appropriate response is to share what we’ve collected,” she wrote.

The governor’s office issued a formal response to the Republican proposal, suggesting the idea was not suitable for a special session. “The governor’s proposed rebate would require a one-time expenditure. Eliminating New Mexico’s personal income tax would have recurring and significant budget implications that demand comprehensive analysis and rigorous debate better suited to a regular legislative session,” the statement read. The office suggested that if the Republican leaders wish to pursue the idea, they should introduce it as formal legislation during the next 60-day session, which begins in January.

The state's Democratic party offered a sharper rebuke. Daniel Garcia, a party spokesperson, characterized the Republican call as a “publicity stunt” and a “handout for the wealthy.” Garcia claimed the proposal would ultimately result in “a massive shift of the tax burden onto New Mexico’s working lower and middle class.”

This is not the first time New Mexico Republicans have pushed to axe the income tax. The issue has been a recurring theme in recent years, though the Democratic-controlled legislature has thus far shown no appetite for a full repeal. Instead, the majority party has favored more targeted tax relief measures, such as expanding tax credits for low- and middle-income families. If the proposal were to eventually pass, New Mexico would become the 10th state in the nation without a personal income tax, joining Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

With the governor’s office signaling its preference to handle the matter in a regular session, the immediate prospect of a special session appears unlikely. The debate over eliminating the state income tax is now expected to be a central issue when the legislature convenes in January, where its fiscal viability and economic consequences will be subject to intense scrutiny.