Economy Tax and Budget

Tesla Deal No Model for Economic Development

I was as happy as the next person when Tesla Motors announced last month that it was locating its new factory in Albuquerque. The company is planning to build electrically-powered sedans ranging in price from $50,000 to $65,000 here. If the car is successful – that’s a big “if” considering the car has not been tested by anyone outside the company – Tesla could be a boon to both the state and local economies.

The arrival of Tesla may indeed bring the jobs and economic development being promised, but it must be pointed out that this type of incentive-based “economic development” is not the best or fairest way to improve New Mexico’s economy. Tesla will receive an estimated $20 million in tax incentives. How many small business men and women work every day to grow their businesses, almost always without special tax breaks (and usually besieged by all manner of government regulations)?

The question of “fairness” may sound idealistic with special interests spending millions of dollars to get their “fair share” in Santa Fe and from the City, but our tax policies should be built on the principal of fairness. Indeed, giving special breaks to one company not only shifts the tax burden to the rest of us (including small business), but it creates incentives for companies to spend even more on unproductive activities like lobbying.

The fact that the state is considering investing permanent fund money into Tesla’s unproven electric roadster which happens to fill an “environmentally-friendly” niche makes the relationship between a private company and government a bit too cozy.

Perhaps more importantly, economic research has shown that the best way to do economic development is to keep taxes low, and to the best extent possible, levy them fairly on all businesses.

There is no way for taxpayers, or for Governor Richardson and Mayor Chavez, to know whether Tesla will be the next big thing or a bust. But, to use a baseball analogy, rather than using tax incentives to go out and sign the next “free agent,” New Mexico needs to reform its tax policies in ways that allow the state to build talent from within. This will allow New Mexico to finally become an economic powerhouse.

Paul Gessing is the president of the Rio Grande Foundation, a 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.

Notable News Public Comments and Testimony

Free Market, Free Thinking: A Conversation with Paul Gessing of the Rio Grande Foundation

Albuquerque’s alternative weekly newspaper, The Alibi, recently did a full-length interview with Paul Gessing, President of the Rio Grande Foundation.  Paul discusses what exactly the Foundation does, not to mention both the intellectual and physical journeys that led him to New Mexico.

Click here to read the story. Click here to read a reader’s hostile response to the piece.


Don’t Let Mayor Waste Taxypayer Money on New Arena


Mayor Martin Chávez is at it again. A few months ago he wanted to put taxpayers on the hook for a $300 million tourist trolley along Central. Now he wants a 16,000 seat arena and hotel complex with much of the expected $350 million price tag to be footed by taxpayers.

As much as we all desire Albuquerque’s Downtown to be a vibrant place to visit, spending megabucks on an arena is a costly and uncertain way to spur development. Like the streetcar, a taxpayer-subsidized arena and hotel complex will not generate new investment, but will suck money from other areas of the city and send it Downtown.

Economists have repeatedly found that there is no net increase in economic activity derived from stadium and arena projects. Dennis Coates and Brad R. Humphreys, for example, have explained that “As sport- and stadium-related activities increase, other spending declines because people substitute spending on sports for other spending.” In other words, fan money spent at a new arena would likely have gone to other entertainment absent the arena. Thus, net economic benefits are zero.

Of course, that is assuming that Albuquerque even finds a regular tenant for the arena that can draw a crowd. Given the track record of the area’s minor league hockey and basketball teams, even a permanent minor league tenant for the proposed arena may not mean success and would likely result in massive losses to taxpayers as the building sits empty much of the time. After all, the Scorpions are selling a disappointing average of just over 3,000 tickets per game in a brand new 6,200 seat arena in Rio Rancho and attendance at Thunderbirds games at Tingley averages in the hundreds.

These points are not meant to disparage the Albuquerque sports fan, but a team from any of the “major league” NBA, NHL, or Arena Football leagues is not on the horizon. More importantly, given the relative population and income levels found in the Albuquerque metropolitan area (our population ranks 65th in the country), there are a number of cities in line to get big-time professional franchises before us.

If a group of private investors were considering whether or not to invest their own money in a sports arena, they would undoubtedly look for signs that additional capacity was needed or that a market niche was being left unfulfilled. Clearly, that is not the case here in Albuquerque. With Rio Rancho struggling to fill an arena less than half the size of that being proposed for Albuquerque and Tingley Coliseum having experienced “an inconsistent event demand over the last few years,” according to the consulting firm that was paid by the city to evaluate the need for the new arena, it would appear that Albuquerque has a surplus of arena space, not a deficit.

So, why is Mayor Chávez pushing for a 16,000-seat arena despite the obvious lack of need? First and foremost, unlike a private investor attempting to turn a profit, Chávez can leave his legacy using our tax money. The wise use of resources is clearly not his first (or even second) concern. Secondly, although private arenas have been constructed in Columbus, Ohio, Detroit, Chicago, outside of Detroit, and in Washington, D.C., just to name a few, again, there would have to be some reason besides blind optimism for an investor to take interest.

Chávez, like most politicians, would rather spend taxpayer dollars on luxury items like trolleys and arenas than on maintaining streets and bridges and keeping the roads clear of snow. Ironically, despite what many would call Chávez’s “progressive” political bent, this arena project would do nothing more than take $350 million from middle and low-income Albuquerque taxpayers and give it to the wealthy developers and patrons of the proposed sports arena and high-end hotel, both of whom are likely to be wealthier than the average Duke City resident.

The case against a taxpayer-financed arena is rather damning, but in the mayor’s head it all boils down to the simple fact that he thinks he knows how to spend the taxpayers’ (our) money better than we possibly could. It happened before with the trolley; again it is up to the citizens of Albuquerque to tell their big-spending politicians “no!”

The Rio Grande Foundation is a research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.

Energy and Environment Oil & Gas

Politics and the State’s Energy Problems

New Mexico businesses— whether directly engaged in the energy industry or not— should be wary of proposed policy changes supposedly targeted at energy companies. If enacted, these laws would actually harm users of energy (residential as well as business users).

The misguided proposals under consideration would tax alleged “windfall profits” and address global warming in a wasteful and counterproductive way. New Mexico politicians have a disproportionately powerful place in all this. Democratic Sen. Jeff Bingaman is the new chairman of the Senate Energy Committee and the senior Republican and immediate past chairman is Republican Sen. Pete Domenici. Meanwhile, our ambitious Gov. Bill Richardson, a former Energy Department cabinet secretary, has spoken out for both misguided proposals.

THE NEW CONGRESS AND THE “WINDFALL PROFITS TAX”: Although neither Bingaman nor Domenici seems to be enthusiastic about a proposed windfall profits tax on oil and gas companies, the newly resurgent Democratic leadership in both houses has control of the agenda and is making noise about such a proposal.

A little perspective is needed here: Even during the “spike” of gasoline prices when Hurricane Katrina knocked out much import and refining capacity, the price of gasoline came nowhere close to its all-time high. When we compare prices over time, we need to adjust them for changes in the purchasing power of the dollar. Adjusted for inflation, 1981 gasoline prices were some 24 percent higher than they were during last year’s $3-plus-a-gallon “spike.” Moreover, disposable income in New Mexico has increased since 1981. The average New Mexican’s disposable income could buy 88 percent more gasoline even at the peak of the 2005-06 “spike” than it could in 1981.

The last thing we need now is for government to make matters worse by bashing profits. Seeking profits (and avoiding losses) is what drives all sectors of that market economy; and it is why we are prosperous.

When we see rising profits we can be sure that more resources will be devoted to the profit-generating activity. It may come about a bit slower in the case of oil and gasoline (compared, say, to Microsoft) because of the difficulties of bringing new wells into production or of building and expanding refineries.

Oil companies’ profits may be a little higher than their long-term average; but those profits are not unreasonable compared to other industries. Moreover, taxes paid by oil companies are actually higher than their profits.

CARBON “CAP AND TRADE” AS A SOLUTION TO GLOBAL WARMING: Putting aside questions of whether recent temperature variations are outside the normal swings that have occurred over many centuries, and (if so) whether or not such changes are human-caused, a policy that administers a system of artificial caps on energy sources, poses serious problems for our national— and state— economies:   Giving federal and state bureaucrats control over how much carbon is emitted and from what sources would be counterproductive, highly complex and a nightmare to administer. It would mean higher energy prices and a system that is wide open to political favor seeking.

The politics of carbon emissions would inevitably result in large, unfair transfers of wealth. For example, under the Kyoto treaty, to which the U.S. is not a party, purchases of carbon credits are flowing from the European Union to Russia in massive amounts. Do we want to have the U.S. become victim to this sort of dollar outflow?

It turns out, intentionally or not, that the U.S. is at a real disadvantage when it comes to reducing carbon emissions compared to Europe and Russia. The year selected as the base year from which to reduce carbon emissions (1990) just happens to coincide with vigorous economic activity in the U.S. and recessions in Europe and Russia. In 1990 Europe and Russia were already well below their normal emissions. Nonetheless we find that Europe and Russia are unable to meet their targets.

There are changes in energy policy that would be helpful and would especially benefit our energy producing state. We could strike a better balance between benefits and costs when it comes to regulation. We could allow the building of new refineries. We could relax restrictions on drilling and exploration for oil. All of these actions would reduce the costs and risks for producers, thereby benefiting New Mexico.

Economy Tax and Budget

New Mexico’s Gross Receipts Tax: What Not to Do in State Taxation

As legislatures convene across the country, the state of New Mexico is being thrust into an unlikely role as a model for states that are looking to increase revenues by broadening their tax bases. North Carolina and Missouri are just two of the many states expected to consider broadening their sales tax bases this year. Ohio and Texas have gone even further by joining New Mexico in adopting a gross receipts tax. Whether taxing services or goods, effective tax rates under a gross receipts tax regime are dramatically-higher than the stated rate.  In New Mexico, for example, because of the gross receipts tax effective tax rates are one-third or more higher in New Mexico than in other states.

Unlike a sales tax, gross receipts taxes like New Mexico’s are taxes on the “privilege” of doing business in the state. Under New Mexico’s system, the taxable amount for a service producing firm is the gross amount — not net after business expenses — and the tax liability belongs to the business instead of the customer. That is, when an entrepreneur sells her service, she has to pay tax on the entire amount received even though a sizable portion of her receipts may be necessary to cover her costs. The more costs she has relative to her receipts, the more burdensome the GRT. High overhead service providers, such as doctors, have been particularly hard hit by this tax in New Mexico. Goods producing firms get off a little easier in that they deduct the cost of any raw materials from the gross amount.

Unlike New Mexico, Ohio and Texas levy their GRT’s at rates of one percent or less. That is a far cry from New Mexico where rates run as high as 7.8%. Hawaii and South Dakota — the only other states that levy broad-based taxes — do so at rates of only 4.5% and 6 percent respectively (South Dakota does not tax income).

In discussing Ohio’s need for a GRT, Republican Speaker of the House Jon Husted commented, “Ohio needs a business tax with a broad base and a low rate. We have only a few businesses pulling the wagon and a lot of people riding in it. Everybody is going to pull the wagon a little bit, and we’re going to benefit everybody.”

Husted and his colleagues in Ohio (and Texas) would be wise to study New Mexico situation so as to understand the problems inherent in GRT’s and to learn from some New Mexico-specific mistakes. All gross receipts taxes, for example, create the problem of “tax pyramiding.” Pyramiding occurs when one business purchases a taxed good or service from another business. So, taxes build upon one another as the entrepreneur gets her roof fixed, purchases accounting help, legal help and so on.

Even more problematic than tax pyramiding is the perverse incentives created under the GRT. In New Mexico, rather than maintaining the tax at relatively low rates across the board, the tendency has been for politically influential industries to carve out specific exemptions for themselves in order to reduce their tax burden. One recent example was the successful effort by managed care firms to exempt their industry from the gross receipts tax. Simultaneously, the gross receipts tax for fee-for-service firms actually went up.

Similar exemptions have been carved out for groceries, the film industry, aviation, and space travel, just to name a few well-connected or sympathetic interests. In the meantime, gross receipts tax rates have risen statewide by nearly a full point in many places. Now, when businesses consider locating in New Mexico, some sort of gross receipts tax exemption is nearly always negotiated. This behavior skews the marketplace, gives politicians undue influence over business activity, and ultimately makes New Mexico’s economy less efficient.

States that are now considering dramatic broadening of their tax bases should look long and hard at New Mexico’s experience before acting. Perhaps such taxes can be adopted with safeguards to protect against higher rates and special-interest carve-outs, but “tax pyramiding” is nearly unavoidable and remains an economically-unattractive outgrowth of broad-based taxation regimes.

Dr. Messenheimer is a senior fellow with the Rio Grande Foundation, a 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.

Mr. Gessing is the president of the Rio Grande Foundation, a 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.

Local Government Open Government Top Issues

Eminent Domain Reform a Must This Session

Things are finally looking up for New Mexico property owners. As most people are aware, in June of 2005 the United States Supreme Court further weakened the constitutional protection of personal property rights when it ruled in Kelo v. New London that any government could take a person’s property and transfer it to another, more connected private interest, in the name of economic development and greater tax revenue.

The court left it up to the states or congress to enact legislation to restore the constitutional protection of property owners. New Mexico’s Legislature passed a bill unanimously last session, which Gov. Richardson vetoed. Proponents of property rights, justifiably shocked and dismayed by the governor’s veto, look for actions this year to result in stronger protections.

Legislation passed last year was insufficient as it only protected owners from the taking of their property on behalf of another, presumably more well-connected private interest, for three years. Three years and one day later, the government could dispose of it as they wished. To his credit, and with the understanding that a vast majority of New Mexicans want their property rights protected, Gov. Richardson did not simply veto the bill.

Instead, he quickly formed a task force to study the eminent domain issue and make recommendations for the 2007 legislative session. More recently, Richardson has endorsed the task force’s recommendations and says that he plans to have them introduced as a package of reforms in the Legislature.

Those recommendations have been released and after careful analysis it is clear that the task force agreed with the Rio Grande Foundation and others that property rights must be protected. Recommendations made by the task force included:

  • Repeal of both the Urban Renewal and the Community Development laws. Over time, layers of laws have been enacted in New Mexico pertaining to eminent domain. This unanimous recommendation more clarifies than changes policy.
  • On a 10-7 majority vote, the task force recommended removing eminent domain authority from the Metropolitan Redevelopment Act. This is where the task force takes its firm stance against eminent domain for economic development and against the Kelo decision. The task force explicitly states that governmental “police powers” are the appropriate way to remedy “hazardous and unsafe conditions” without resorting to the “extreme powers contained in the Metropolitan Redevelopment Act.”
  • In another move to protect property owners, 14 of the 17 members of the task force expressed concern that “nearly any property in New Mexico could be found to be a slum or blighted area as currently defined.” To remedy this situation, the task force urges clearer language to ensure that “blight” really means what the term implies.
  • The task force also unanimously urged several procedural changes including increased hearing and notice requirements prior to eminent domain proceedings and the provision of relocation and transition assistance for those affected by eminent domain. Elsewhere, statutory language would be tightened under the task force’s recommendations.

These recommendations are an important contribution to the debate over eminent domain. Despite the overwhelming opposition to abuse of eminent domain as evidenced by the public outcry in the wake of Kelo, special interests — developers and representatives of local governments — have been effective in bottling up legislation in Congress and in some states. In fact, William Fulginiti, executive director of the New Mexico Municipal League, said that organization strongly opposed the task force’s recommendations and would work to prevent them from being implemented.

If Gov. Richardson truly has national ambitions, he must ignore Fulginiti and others who want to weaken your property rights and act this year on eminent domain. The task force’s recommendations are sound; the time for action is now.

Siebert Ickler, of Las Cruces, is an adjunct scholar with New Mexico’s Rio Grande Foundation, an independent, non-partisan, tax-exempt research and educational organization.


REAL ID Should be Real Concern for NM Businesses

The REAL ID Act was passed by Congress in May of 2005 without a single hearing in the Senate. Although the law is theoretically supposed to increase the integrity of our nation’s identification cards, it really amounts to yet another power grab by arrogant politicians in Washington.

This new federal mandate – if implemented – will cost New Mexico taxpayers $43 million and place a heavy enforcement burden on small business. During the upcoming legislative session, New Mexico lawmakers will be faced with the decision to either go sheepishly along with outrageous Congressional demands or instead stand up for New Mexicans and New Mexico businesses by rejecting this costly mandate.

So, what would REAL ID actually do?

  •  If New Mexico chooses to implement REAL ID, the state’s Motor Vehicle Division (MVD) will need to verify the “issuance, validity and completeness” of every document presented to them;
  •  MVD would be expected to copy, and store both in paper and electronic form documents such as the birth certificates and Social Security cards and to keep those records for up to 10 years;
  • New Mexico would automatically take part in a shared database making each person’s information available to all states, the federal government as well as the Canadian and Mexican governments;
  • A “machine readable zone” that will allow for easy capture of personal data by anyone with the appropriate reading mechanism would be added to your drivers’ license.

It is hard to believe that New Mexicans would want to put nearly all of their personal information and the responsibility for protecting that it in the hands of a government agency that is not even set up for that purpose. That is exactly what would happen under REAL ID implementation.

The potential for mismanagement of personal information was made clear last year when, in the hunt for alleged cop-killer Michael Astorga, it was discovered that MVD employees were providing Astorga with driver’s licenses in other people’s names

While leaving identification efforts open to abuses, the law makes obtaining licenses more difficult for law-abiding citizens. Gone will be the days when you can apply for a license and receive it in the same day. Since the law requires those without an official government document verifying their address to attain alternative verification, businesses (most especially utility companies) will face increasing burdens under the new law.

In addition to implementation costs, New Mexicans could wind up paying close to $100 for their ID’s – six times more than the $16 they pay now – if the Legislature goes along with Congress’s wishes. It is unclear exactly how much the additional paperwork and bureaucratic hassle will cost businesses, but given the requirements of the new law, those costs may be quite high.

So what are taxpayers getting for their money? Even if REAL ID improves our ability to identify people, discerning their intentions is another problem entirely. Worse, once the system is fooled or identities are stolen, centralized databases will allow for even greater mischief than under the current system.

Time and again, for example, the ability of government officials to accurately separate friend from foe has been called into question. The so-called “No Fly List,” which has been used to stop potential terrorists, has led to confusion and problems for some travelers. The wife of Senator Ted Stevens – whose name “Catharine” is similar to that of blacklisted singer “Cat Stevens” – is just one of thousands of innocent people to face repeated problems. Will the bureaucrats at New Mexico’s MVD be any better than those working for the federal government?

If the outrageous cost and the vast potential for mischief associated with REAL ID implementation are not enough, principle alone should convince policy makers to reject REAL ID. For too long, New Mexico and other states have allowed the federal government to badger them into bad policy making with an array of big sticks and carrots. Telling states how to run their driver registration systems is not Congress’s job.

It is time for New Mexicans to stand up for the Constitution and our state’s autonomy when Congress oversteps its authority. Say “No” to REAL ID.”

Paul Gessing is the president of the Rio Grande Foundation, a 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.

Economy Tax and Budget

Raise Tax Credit, Not Minimum Wage


The Republican Party is waking up from the Nov. 7 shock. In a moment of weakness the Republicans and moderate Democrats in Congress are about to get snookered into a grand deal of raising the mandated minimum wage. What a shame!

Back in 1938 Congress legislated a statutory minimum wage rate as part of the Fair Labor Standard Act. Since then, not much good has come out of it: Any time it has been set at a level exceeding the value of labor’s contribution to production, as confirmed by many empirical studies, unemployment— mainly among teenagers, women and minorities— has resulted.

Additionally, since the minimum wage law does not cover fringe benefits, to keep the cost of labor in line with labor productivity, employers cut back on various fringe benefits offered to unskilled labor. Medical insurance, on-the-job training and “free lunch” come to mind.

Although a worker may continue to work with reduced fringe benefits, his or her welfare diminishes because an option previously available no longer exists and also since wages are taxable and most fringe benefits are not.

And then, there is the issue of poor targeting that would increase the incomes of teenagers and unskilled labor in two- or three-earner families. Even if the mandated minimum wage were effective, it would increase income where there is no poverty. An illustration of the worst-case scenario of misguided targeting is that of a household of two wage earners, where one member earns $45,000 annually and the other earns $5.15 an hour. Assuming a work year of 2,080 hours, together they earn $55,712. Raising the minimum wage rate from $5.15 to $7.15 would add $4,160 to the household’s annual income. Note: The poverty line for a two-person household is $13,200.

The hysteria over the erosion of the real value of the minimum wage by 19.8 percent (from 1998 to 2005) is the driving force behind the movement to increase the minimum wage. Some would argue that it should be raised to $6.17 to adjust for the impact of inflation since 1998.

Others would reason that in 1969 the nominal minimum wage was set at $1.60. Since then the consumer price index rose 432 percent and accordingly in 2005 dollars the minimum wage in 1969 was $8.51— the highest since 1938. Hence, they claim, the minimum wage should be raised to a whopping $8.51

However, the best anti-poverty tool is the late Milton Friedman’s idea of negative income taxes, whereby the government pays income to the poor. Unlike minimum wages, negative income taxes target the poor precisely and hardly disrupt labor markets.

While it is true that negative income taxes contribute to the fiscal deficit, we should take into consideration that unskilled workers who lose their jobs in the wake of rising minimum wages relocate into the nonmarket where generous public welfare programs are available.

The Earned Income Tax Credit (EITC) program that was established in 1975 is in essence a federal-negative-income-tax program. An ideal legislation would be to abolish the mandatory minimum wage, and replace it with an expanded EITC. However, the minimum wage, like the medical-care tax advantages that were born of some misguided federal regulation during World War II, has become a sacred cow.

To illustrate EITC’s mechanism, consider a single low-income mother with two children. In 2006 EITC entitles her to a tax credit of 40 percent for every dollar earned up to $11,340, to a maximum of $4,536; it remains at this maximum level in the bracket from $11,340 to $14,810; thereafter EITC is reduced by about 21 cents for each additional dollar earned until it reaches zero at an income of $36,348.

If she earns the minimum wage of $5.15 an hour, her annual income is $10,712 (assuming 2080 working hours per annum) and her EITC is $4,285— 40 percent of her income. For comparison, her hourly EITC is $2.06.

Suppose the mother in our illustration is given the choice between increasing her minimum wage by an additional $2.06 an hour, or, alternatively, increasing her annual EITC by another $4,285. She should opt for the latter, which would increase her income without the risk of losing a fraction of her fringe benefits or even her job.

If our new congressional leaders, Republicans and moderate Democrats, sincerely want to fight poverty, they should leave the mandated federal minimum wage at $5.15 and expand EITC to help the poor.

Micha Gisser is professor emeritus of economics, University of New Mexico, and a senior fellow, Rio Grande Foundation.

Local Government Notable News

New Mexicans Deserve Direct Democracy


While politicians and voters around the country and here in New Mexico celebrate their Election Day victories and mourn defeat, voters in 24 states nationwide — not including New Mexico — also exercised a more direct form of control over how their affairs of state are managed. In these states, voters were able to place measures on the ballot through the initiative process, rather than waiting, sometimes forever, for politicians to tackle the issues.

In the Land of Enchantment, however, voters can only hope that the politicians they have elected will live up to their promises. In fact, New Mexico and Hawaii are the only western states (Rocky Mountains and beyond) that lack this form of direct democracy.

In the aftermath of Election Day 2006, it is clear that citizens do not always speak with one mind, but they always have something important to say. Gay marriage and efforts to prohibit it may get the most headlines, but did you know that 11 states considered measures to limit the use of eminent domain? With Gov. Richardson having vetoed a bill that would have restricted the use of eminent domain and polls showing that a vast majority of New Mexicans support such restrictions, wouldn’t it be nice to circumvent the politicians on this one?

Raising the minimum wage is another hot topic here in New Mexico, and while I personally believe that it is bad economic policy for states to legally-mandate wage levels, I am pleased that voters in six states were able to decide for themselves on Election Day.

The fact is that voters are by-and-large well-informed on these single-issue ballot measures and are often willing to take on issues considered too politically radioactive for politicians to handle. In fact, while three states — Oregon, Nebraska and Maine — rejected the placement of strict limits on the power of politicians to tax and spend, Colorado’s strict tax and spending limit was passed in 1992 through the initiative process. Some states may not be ready for Colorado-style tax and spending limits, but it would be nice if New Mexicans had the final say.

Legislative term limits are another area that voters are willing to tackle that most politicians, for obvious reasons, seem more than happy to ignore. In fact, 16 states nationwide limit the terms of their legislators and all of these states did so through the initiative process. As it lacks the initiative process New Mexico is of course one of the states lacking legislative term limits.

The term limits issue is perhaps only the most obvious issue on which legislators tend to act in their own interest while ignoring the will of voters. While a legitimate debate can be had over whether term limits improve governance, it is hard to argue that legislators view term limits as a anything but a mortal threat and they will not pass them. Tax and spending limits like Colorado’s are another limit on legislative power and, as such, such limits are not likely to pass in the absence of the initiative process. After all, it is the belief of overwhelming numbers of our legislators that they, not taxpayers, can make the best decisions on how to spend taxpayers’ money.

The fact is that voters are not always correct in assessing difficult political and economic decisions, but neither are legislators. Given the ever-increasing amounts of unfiltered information available to voters over the Internet and elsewhere, doesn’t it make sense to give citizens a greater say in New Mexico’s future?

Siebert Ickler is an adjunct scholar with 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.


Less is More: More Money in Taxpayers’ Pockets Trickles Down to Less Poverty and a Thriving Economy


Many New Mexicans may remember that, at this time last year, our neighbors to the north in Colorado were having a heated debate over government spending and taxes.

Voters in Colorado narrowly approved the measure known as Referendum C, which allowed the state government to spend all the revenue it takes in for the next five years – but the state’s taxpayer protections, known as the Taxpayers’ Bill of Rights, lives on. More importantly, Colorado’s experience with strictly limiting taxes and spending provides New Mexicans a clear example of how we could change our state’s economic fortunes for the better.

Government plays a major role in New Mexico’s economy. In fact, $2 is spent by the federal government within our borders for every $1 our citizens send to Washington. As if the large federal presence were not enough, according to data from the Census Bureau, New Mexico employs more state and local workers per capita than all but two other states.

This reliance on government is not the economic boon that some would like to believe.

While like New Mexico in many ways, Colorado is not as reliant on government spending. In fact, in 1992, Colorado adopted strict limits on taxes and spending in a conscious effort to shift resources from government and into the private sector.

Unlike New Mexico, where politicians can raise taxes and spend as much as they like with few limits, Colorado’s politicians must ask voters to approve any spending above the “natural” rate of government growth – the combined effects of inflation and population – and any tax hikes. Between 1997 and 2002, Colorado issued annual tax rebates totaling more than $3.2 billion.

So what does giving voters greater control over the taxing and spending habits of their politicians do for the economy?

Well, in terms of personal income levels, which are probably the most effective mechanism for measuring living standards, Colorado outstrips New Mexico by wide margins.

In 1992, Colorado ranked a respectable 17th in personal income levels. Thanks in large part to its Taxpayers’ Bill of Rights, it now ranks 8th in the nation. This was the greatest jump during the time period. New Mexico, on the other hand, ranked 46th in the nation in 1992 and ranks 46th today.

Even more impressive, especially given the opposition to fiscal restraint by most on the left, is the fact that spending restraint has resulted in significant poverty reductions in Colorado. That state’s poverty rate is lower than all but 11 other states. New Mexico, on the other hand, has one of the worst poverty rates in the nation, beating only two states – Mississippi and Louisiana.

The problem is that politicians, if left to their own devices, will spend taxpayer money far in excess of the real needs of government. Much of this money is either wasted or used in ways that are not as beneficial to the citizens of that particular state as if the money was left in the private sector. Over time, this means that government consumes more of the economy, while the private economy, from which economic growth and innovation result, is less robust.

Some will assume that if we only elected the “right” politicians, the problem would be solved, but history shows this to be wishful thinking.

The Rio Grande Foundation analyzed the spending records of each of the last four governors of New Mexico and found that while Gary Johnson was the most fiscally-conservative and Bill Richardson the most spendthrift, Garrey Carruthers, a Republican, was a bigger spender than Bruce King, a Democrat.

Spending in New Mexico – not to mention around the country and at the federal level – is a bipartisan problem.

There is no reason for New Mexicans or our political leaders to accept our current status of economic lagging. It is not culture, our reliance on resource extraction or even our poor educational system that hinder our state economy. In reality, it is our willingness to let government take more of our hard-earned money than is absolutely necessary that keeps us down.

Only by placing strict limits on our political leaders will New Mexico’s economic future brighten.

Gessing is president of the Rio Grande Foundation, which describes itself as “a 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.”