Arguments for tax hike still don’t make any sense

The Journal’s Winthrop Quigley responded to the Rio Grande Foundation’s recent op-ed appearing in these pages by assembling a team of ideologically sympathetic economists from around New Mexico to generate a six-page policy brief. Clearly, our work is touching a nerve.

The paper, which we have reviewed, contains some points of agreement (the gross receipts tax in its current form is seriously flawed) and many more points of disagreement, but neither in his most-recent column, nor in their paper, do Quigley and friends ever make a clear (let alone convincing) case for raising taxes on hard-working New Mexicans.

The tax-hikers’ most compelling point is that when state and local burdens are taken together, New Mexico’s overall tax bill is slightly below average. A 2016 Wallethub report places New Mexico 26th among US states in this regard, with a burden that is 0.48 percent less than average. That hardly justifies tax hikes. Delaware, for example, imposes a burden that is 44 percent below average. Does that mean their politicians must raise taxes immediately? Hardly.

Besides, we agree with Quigley’s economists (and most any economist around) that New Mexico’s tax structure is deeply flawed. So let’s come together to reform the gross receipts tax in ways that don’t lead to rent-seeking among interest groups while causing pyramiding and chasing small businesses and entrepreneurs out of state. Why make a bad system (and New Mexico’s struggling economy) worse by increasing the burdens it imposes?

It is worth reminding readers that our response to Quigley came after three separate columns from him arguing for higher taxes. He has now taken a fourth column to respond to our response.

In those three columns, Quigley included data that would lead readers to believe that New Mexico’s government is smaller than most and that higher taxes are a reasonable and necessary response to the state’s financial woes. While the Rio Grande Foundation spends a vast majority of its time researching and reporting on our state’s heavy regulatory burdens, business-unfriendliness, and corporate welfare, ample data do suggest that New Mexico’s government workforce is both bloated and overcompensated.

Quigley’s economists – some of whom are government employees – argue that because New Mexico teachers are considered state workers, data showing that New Mexico has the 2nd-largest (state and local) government workforce among U.S. states is wrong. But Governing magazine’s most recent data ranks New Mexico 10th in the nation for non-education, full-time government workers per capita.

According to Governing, New Mexico has 268 per 10,000 while neighboring Texas has 212 and Arizona has 188.

Quigley’s economists take issue with our data which indicate that New Mexico state and local workers make 20 percent more than their private-sector counterparts when retirement and other benefits are included. They somehow argue that salaries of New Mexicans working at federal installations should be included in the comparison.

This is just silly. Yes, New Mexico has far more than its share of federal workers. That workforce looks even larger when you consider our state’s anemic private sector. But adding federal employees – whose salary is politically determined in Washington and is minimally impacted by local economic forces – makes no sense. In reality, New Mexico’s state and local governments are competing with the private sector for workers. And, when everything is accounted for, those government employees are well-compensated.

Like Quigley and his friends, we at the Rio Grande Foundation wish to have an honest and open discussion about New Mexico’s struggling economy. It is an issue that impacts educational attainment, crime, and the state’s fiscal condition.

Unfortunately, for too long (decades, not years), New Mexico policymakers have relied on federal spending and the oil and gas industry to drive our economy. For a variety of reasons, those economic engines have stalled.

We believe that raising taxes would further hinder the growth of New Mexico’s private sector economy and will continue to research and share ways to make our State government more efficient, not bigger.

Paul Gessing is the President of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility