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Gov.’s attempt to claim role of ‘tax-cutter’ laughable

The following op-ed appeared in the Las Cruces Sun-News on December 28, 2021.

Recently, Gov. Lujan Grisham posted on Facebook in support of her plan for a small .25 percentage point reduction in the State’s gross receipts tax rate, saying, “Lower taxes would enable them to grow their business and hire more people, including local adults with special needs that they focus on employing – and we’re going to make it happen.”

It sounded almost like something we at the free-market Rio Grande Foundation would write and

the Gov.’s statement is true as far as it goes. While we support ANY effort to lower tax burdens on New Mexicans, Lujan Grisham’s plan for a small .25 percentage point reduction in the State’s GRT is totally inadequate and clearly driven by her coming reelection and the fact that she faces a very tough race.

According to the Gov., her plan would cut taxes by $145 million annually. But since she took office, Lujan Grisham has signed tax hikes totaling more than $250 million annually. She also conveniently omits the fact that the oil and gas industry has created a $1.6 billion surplus, the likes of which New Mexico has never seen. Clearly given the economic trials facing average New Mexicans, we deserve much more than a tiny tax cut that fails to even make up for her past tax hikes.

The very same thing the Gov. claims about lower taxes helping people grow their businesses were said in opposition to tax hikes she signed into law in 2019 (HB 6) and 2021 (SB 317). Among the tax hikes passed in these bills were hikes in personal income, motor vehicle, hospital, and health insurance taxes. Clearly, as with gross receipts taxes, much of the burden of these tax hikes is also borne by businesses and affects their ability to hire and grow their businesses.

Worse, none of these tax hikes were necessary. The 2019 tax hikes were passed at a time of record budget surpluses alongside an 11 percent budget increase. The 2021 tax hike was a blatant revenue grab. The Democrat-controlled Legislature and Gov. Lujan Grisham were presented with an opportunity to generate millions of additional tax dollars by re-imposing (and retaining the proceeds from) a federal health insurance tax that had been repealed by the Trump Administration.

Simply allowing the federal government’s health insurance tax (imposed under ObamaCare) to go away would have had the very same positive impacts on businesses and their bottom lines as any other tax reduction, but that wasn’t an election year. This is.

Directly imposing higher taxes is only one of numerous ways in which government makes doing business harder than necessary. In her time in office Lujan Grisham signed a new medical malpractice law that doctors and other medical professionals say will cause them to close or leave. The Energy Transition Act has already begun increasing electricity costs and PNM is concerned about reliability as soon as next summer due to the closure of San Juan Generating Station.

While the Gov. is busy positioning herself as a pro-business “tax cutter” she is also pushing a new “Clean Fuel Standard” that, based on a draft of the bill, would increase gasoline prices by 35 cents per gallon. Every New Mexico business and resident (even if they drive an electric vehicle) would see further price hikes above and beyond current inflation if that bill becomes law.

Sadly, the impact of these anti-business law is to keep New Mexico poor. It is no surprise that New Mexico has one of the highest unemployment rates in the nation despite the massive oil and gas surplus.

Lujan Grisham’s management of New Mexico’s economy both before and throughout the Pandemic have been abysmal and her claim to be a pro-business “tax cutter” are laughable.

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

 

 

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New Mexico’s low labor participation rate has plummeted during COVID

New Mexico has always struggled with low workforce participation levels. It was hardly a surprise when a national study earlier this year called New Mexico the “least hardworking state” in the entire nation. The COVID 19 pandemic AND the federal/state governments’ fear mongering, mask and vaccine mandates and massive social spending programs have done nothing to lure people back into the workforce.

Alas, as the chart below shows (using data from Bureau of Labor Statistics) New Mexico’s workforce participation rate has remained depressed even relative to other state. In January of 2020 the rate for NM was 55.5%. As of October 2021 that rate was 53.3% , a decrease of 4%.

Not only did New Mexico START with lower workforce participation than its neighbors, but it has seen a the steepest decline of any of its neighboring states. No state has gotten back to January 2020 workforce participation rates, but Oklahoma and Utah have gotten close.

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How does New Mexico stack up with big red and blue states?

Our friend Vance Ginn, Chief Economist at the Texas Public Policy Institute, recently compared his state of Texas and another prominent “red” state (Florida) with the biggest “blue” states of California and New York on a range of basic economic statistics.

You can see the data below which is loosely based on Ginn’s analysis linked above. The data are interesting to say the least.

New Mexico is definitely a “BLUE” state. It suffers from terrible workforce participation and unemployment rates and government consumes an outsized portion of our economy (even when compared with “blue” states).

Notably, New Mexico is also even less attractive as a moving destination than either big “blue” state. Ironically, New Mexico is the least “unequal” state as measured by the Top 10% income share and even New Mexico’s poverty rate isn’t “that” bad (compared with the other states) when the Census Bureau includes living costs and government benefits.

Notably, as it is heavily-reliant on oil and gas production and revenues, New Mexico’s economy is much more resource-driven than any of the other states studied.

Economic Freedom of North America (2021)
US Census Percent Population Growth 2010-2020
State Business Tax Climate (2021)
State Economic Outlook Rankings (2021)
State & Local Spending % GDP 2021 
State & Local Tax Burden % of income 2020
Avg. Unemployment Rate 2016-2020
Avg. Labor Force Participation 2016-2020
Avg. Top 10% income share (2000-2018)
Supplemental Poverty Measure (2017-2019)
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Economy Legislature Notable News Tax and Budget Taxes Top Issues

Lujan Grisham’s GRT cut fails to address issues

The following appeared in Las Cruces Sun-News on Sunday, November 28, 2021.

For many years the Rio Grande Foundation has pushed the Legislature to take steps to address fundamental problems with the State’s gross receipts tax. We’ve regularly labeled it New Mexico’s “original sin” of economic policy due to the tremendous harm it does to New Mexico’s economy.

And, while we support ANY effort to lower tax burdens on New Mexicans, the Gov.’s plan for a small .25 percentage point reduction in the State’s GRT burden hardly makes up for recent increases. With a $2 billion budget surplus looming this January and the Senate Finance Committee Chair saying the Legislature has “more money than they know what to do with,” it is time to really reform the GRT, not provide an election year sop to struggling businesses and families.

Currently, the City of Las Cruces GRT is 8.3125%. Back in 2010 that rate was “just” 7.0%. The Gov.’s reduction, if implemented, won’t even get the rate back to 8.0%. Las Cruces is not alone. GRT rates have risen dramatically over the last 20 years due to a combination of state and local policies.

But the most important problem with the GRT is its unfair treatment of small businesses. Accountants, bookkeepers, even medical professionals, and attorneys (and many others) all must charge this tax on top of the cost of their services. Alternatively, service providers located in other states do not have to charge the GRT. This makes New Mexico especially unattractive as a location for small businesses. And it is those small businesses that grow into tomorrow’s big businesses which can employee hundreds or even thousands of workers and boost state and local economies.

With the Legislature expected to convene in January with up to $2 billion in surplus revenues generated primarily from oil and gas, now is the time to focus on fundamental reform. According to the Gov. this tax cut will reduce revenues by $145 million annually. That’s a tiny fraction of the surplus. At a bare minimum proper GRT reform needs to eliminate the taxation of these business services. It will be easier to make the change when there is plenty of revenue available.

The GRT and much-needed reforms to it are not a partisan issue. Republican Jason Harper has introduced reform legislation in recent years with former Senate Finance Committee Chair, Democrat John Arthur Smith. More recently, powerful House Appropriations Committee Chair Democrat Rep. Patty Lundstrom told attendees of the New Mexico Oil and Gas Association (NMOGA) conference in October that “tax pyramiding” needed to be addressed by the Legislature in the upcoming session.

While taxing services is the fundamental problem with the GRT, there are others. Specifically, while the tax was originally conceived as being applied at VERY low rates and broadly, the political process has led to the current, sorry state of high rate, exemption-filled tax structure.

Special interests line up in Santa Fe to lobby for exemptions and deductions for their business or industry and the Legislature is more than happy to offer those exemptions. And, whether you support taxing groceries or not, the process of eliminating that tax has directly contributed to the massive rise in GRT rates in recent years.

In addition to addressing taxes on business inputs and services, the Legislature needs to put a stop to the special exemptions while also constraining the future ability of local governments to raise rates.

A tiny tax cut passed as we head into an election year with a massive budget service may or may not be good politics, but it certainly isn’t enough to address the fundamental problems with New Mexico’s GRT.

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

 

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Opinion piece: Economic Freedom Takes a Hit in New Mexico

Anya Kamenetz | KRWG

The following appeared at KRWG on November 17, 2021.

Nearly any business owner in New Mexico will tell you that Michelle Lujan Grisham and her policies have been unfriendly to business. Setting aside the COVID lockdowns, since she took office in 2019, we’ve seen multiple tax hikes, numerous new regulations, and numerous policies that make it more costly and difficult to hire workers.

These policies aren’t just “anti-business,” taken as a whole they undermine economic freedom. A new study provides hard data that quantifies and highlights the negative impact of policies of Lujan Grisham and the Legislature (at least in 2019).

For starters, it is worth defining the term. Economic freedom is broadly speaking the ability to engage in voluntary economic transactions without unduly being hindered by government policies. This includes low, fair taxation, reasonable rules and regulations, and a limited government spending.

Not surprisingly, policies of economic freedom are strongly correlated with greater economic prosperity. In fact, according to the 2021 edition of the report, the freest 25% of states have personal incomes that are 7.5% higher than the national average while the 25% of least free states have personal incomes that are 1% less than the national average.

New Mexico has long lagged its neighbors and most of the nation in economic freedom having consistently been in the lowest quartile for years. Thus, it is not surprising that New Mexico is among the most impoverished states in the nation.

But, when Gov. Susana Martinez took office in 2011, New Mexico ranked 46th in economic freedom. Despite her having to deal with a hostile Legislature, that number improved to 42nd by the last year of her administration mostly due to her fiscal restraint.

But, when Lujan Grisham took over in 2019 along with a liberal Legislature the State saw a massive uptick in government spending, several tax hikes, new regulations, and numerous other policies that make New Mexico less economically-free. On the other hand, New Mexico’s neighbors are all among the most economically-free states in the nation. Texas, with no personal income tax and a pro-freedom labor laws like “Right to Work” ranks 4th overall.

While we don’t have the data on how economic freedom has fared in New Mexico in 2020 and 2021, we know that in general Gov. Lujan Grisham and the Legislature seem to look to California as their model. Alas, the State is one of the few ranked worse than New Mexico on economic freedom at 49th. Only New York performs worse.

The fact is that the policies passed in 2019 that caused New Mexico to slide in economic freedom have only been reinforced by others that further undermine economic freedom in 2020 and 2021.

With a $2 billion surplus, Gov. Lujan Grisham has proposed a miniscule reduction in the gross receipts tax (while leaving the grotesque pyramiding and loopholes intact). But, we can expect that an overwhelming majority of that surplus will go to even more government spending that will do nothing to actually improve New Mexico’s serious poverty challenges or overall economic outcomes.

It is time for New Mexico politicians (and voters) to prioritize economic freedom in turning our State around.

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

 

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New Mexico falls further behind in latest economic freedom report

According to the 2021 edition of the Economic Freedom Index of North America report from the free market Canadian think tank Fraser Institute, New Mexico, in calendar year 2019 (the first year of the Lujan Grisham Administration), slid from 42nd (in last year’s report which used data from the final year of the Martinez Adm.) down to 46th.

While New Mexico has long lagged its neighbors and most of the nation in economic freedom, the 2019 legislative session saw a massive uptick in government spending, tax hikes, newly-imposed regulations, and numerous other policies that make New Mexico less business-friendly. All of New Mexico’s neighbors are among the most economically-free states in the nation.

Not surprisingly, most economically-free half of jurisdictions have higher incomes than do the least economically-free jurisdictions like New Mexico. It is not surprising that New Mexico is among the most impoverished states in the nation.

New Hampshire, Tennessee, Florida, and Texas, were among the MOST economically-free states in the latest report (full rankings below) while California and New York were among the few states that trailed New Mexico. Click on the image below for the FULL report:

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RGF discusses NM’s slow unemployment recovery w/ KRQE Channel 13

Throughout the COVID 19 situation New Mexico’s economy has generally lagged behind the rest of the nation. A new report from Wallethub shines some light on the latest data which places New Mexico 48th in terms of its recovery since the start of COVID. Things are not improving much as we dropped to 49th week-to-week.

Here is the story from KRQE. Charts are directly from Wallethub.

Source: WalletHub
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RGF offers thoughts on United’s future stadium ambitions

While RGF is pleased by Albuquerque voters’ overwhelming rejection of the proposal to build a taxpayer-financed soccer stadium near downtown, we recognized all along that the Team was not going to give up their quest for a new stadium.

Channel 7 KOAT laid out some ideas including potential stadium locations on tribal lands. RGF expects that, given the massive surpluses available to the Legislature and Gov. Lujan Grisham, we could see significant state dollars used to fund a stadium even if Albuquerque voters have rejected the concept.

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A good night for reform-minded leadership nationwide/in New Mexico

If you’d like to listen to Rio Grande Foundation president Paul Gessing discuss the 2021 election results (and numerous other issues later on), check out his recent interview with Jim Williams of KLYT 88.3FM on ABQ Connect. Paul is a regular guest on Jim’s show, but he has regular guests on a variety of local issues of interest.

In terms of local election results, it was obviously disappointing to see Mayor Keller who has done such a poor job managing public safety and the homelessness problem win so handily in Albuquerque. But, the taxpayer-financed United Stadium supported by Keller (and opposed by the Rio Grande Foundation) lost 2-1.

In terms of City Council, the West Side saw the ouster of two incumbents in favor of former Councilor Dan Lewis and newcomer Louis Sanchez.

Two other races are heading to a runoff with the requisite early voting and an “election day” of December 7. Those races include conservative leaning candidates Lori Robertson (District 7 in the mid-northeast heights) and Rene Grout (District 9 in the northeast/southeast heights).

APS school board also saw seats shift from union-backed candidates to more reform-minded candidates including Courtney Jackson, Crystal Tapia-Romero, and Danielle Gonzales .

Unfortunately the reform wave did not reach Las Cruces city council and the Foundation’s own Patrick Brenner lost in his bid for school board in Rio Rancho.

Nationally-speaking, Virginia’s governor’s race was won by Republican Glenn Youngkin in large part because of his pro-education reform, anti-CRT stances.

In New Jersey in what could have been an unprecedented upset, the Republican fell just-short.

Overall, it was a good night for conservatives and those that believe parents, not the unions and bureaucrats should control education.

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Santa Fe New Mexican op-ed: An energy crisis looms in New Mexico

The following appeared in the Santa Fe New Mexican on October 24, 2021.

Western Europe is facing an energy crisis this winter. Prices have skyrocketed. Natural gas is 400 percent higher than the start of 2021 while coal is up over 300 percent.

As if high prices weren’t enough of a problem, 40 percent of the natural gas that Europe uses comes from Vladamir Putin’s Russia, an unreliable supplier to say the least.

New Mexicans should take heed. Thankfully, despite the Biden Administration’s permitting ban on federal lands (since invalidated by a judge), New Mexico has steady supplies of oil and natural gas.

Those supplies help protect us from wild price swings and supply disruptions like those that could cause massive economic pain and human suffering in Europe this winter.

While we’ll be fine this winter, New Mexico’s largest utility is facing serious challenges finding enough electricity by next summer.

Due to the Energy Transition Act of 2019 which forms the cornerstone of Gov. Michelle Lujan Grisham’s “Green New Deal” agenda, the San Juan Generating Station is slated to be permanently shut down next June during the hottest part of next summer.

PNM executives have stated clearly that the hunt for “renewable” power to replace San Juan Generating Station is not going well. Even in the best of circumstances “renewables” like solar and wind are inconsistent and require backup like batteries, but the pandemic has hit supply chains hard and projects are being delayed.

Unless Gov. Lujan Grisham acts quickly to keep San Juan Generating Station open, the plant will be taken offline as scheduled this summer and blackouts and brownouts could be the result. If you don’t believe me, Tom Fallgren, PNM’s vice president of generation told the Public Regulation Commission recently, in discussing the possibility of brownouts and blackouts said, “Am I concerned? Yes. Do I lose sleep over it? Yes. Can we solve it? Yes.”

He further noted that PNM practices for scenarios, such as brownouts, have detailed procedures to handle them and prioritize power for places such as hospitals.

Finally, Fallgren noted, “We are looking at any and all options. … And we continue to beat the bushes, so to say, for other opportunities as well.” Are you feeling reassured? I’m not. Interestingly enough, PNM continues to reject new natural gas-powered resources in New Mexico as replacement supply.

Even if we escape serious power outages this summer, the issue is not going away. In fact, it will only get worse. In 2023 and 2024, PNM is abandoning its leases for power from Palo Verde (a nuclear power plant in Arizona), and by the end of 2024, PNM will no longer receive power from the Four Corners plant, yet another coal-fired plant here in New Mexico.

Ironically, as has been discussed in PRC hearings, the Navajo Tribe wants to take over Four Corners plant (saving jobs and tax revenues) while environmentalists are pushing hard to shut it down completely. Regardless of what happens next summer or over the next few years, these are policy-driven decisions made by Lujan Grisham and Democrats in the Legislature. They could have massive implications for New Mexico families.

Already, with the price of everything already going up, New Mexicans’ electric bills rose 5 percent just last year. Those rate hikes will continue to escalate for years into the future regardless of whether PNM or Avangrid is in charge. Wasn’t the Energy Transition Act supposed to hold the line on price increases?

New Mexicans and their elected officials must be aware of the very real problems facing them as June of 2022 approaches. It is not too late to prevent this crisis.

Paul Gessing is president of New Mexico’s Rio Grande Foundation, a tax-exempt organization dedicated to promoting prosperity and individual responsibility.