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RGF discusses hotel tax lien/lodgers tax w/ KOAT 7

Recently, RGF’s president was walking downtown and noticed the Hyatt Hotel downtown was completely closed to the public. Physical entry to the property was impossible and his phone calls were not returned.

Ultimately, it came to light thanks to an Albuquerque Journal article that the hotel was closed due to a lack of convention business AND that the City of Albuquerque had filed tax liens against several properties for lack of payment of lodgers taxes. The Rio Grande Foundation has expressed concerns in the recent past about lodgers taxesand agrees that reform is needed, BUT if the business is collecting the tax from its customers, they should be remitted.

Check out the story here and by clicking the image below:

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RGF’s latest at National Review: Stagnant New Mexico a Case Study in Why Economic Policies Matter

The following appeared at National Review on May 24, 2021.

The U.S. Census Bureau recently released population data showing how the population of America and its 50 states had shifted between 2010 and 2020. As has been the case for decades, Midwestern “Rust Belt” states overall lost representation, while fast-growing states in the Southwest gained seats (Texas added two and Colorado one). For the first time ever, California actually lost a congressional seat.

Yet overlooked by the national media in all of this was what can only be described as the impending creation of a population “donut hole” in the otherwise fast-growing Southwest — that is, my home state of New Mexico.

While Utah and Arizona didn’t add congressional seats as New Mexico’s other neighbors Colorado and Texas did, both states saw double-digit population growth for the decade. New Mexico’s population, on the other hand, grew at just 2.8 percent over that period. That puts the state on par with Vermont and just ahead of Maine, at 2.6 percent.

When neighboring Utah grows at 18.4 percent and Texas grows by 15.9 percent — and your own state’s population barely increases — there must be a problem. Hint: It’s not the weather. A variety of factors have been driving Americans to move from the Northeast to the Southwest, including the search of better weather. But New Mexico’s is unparalleled. It is sunnier than Florida and doesn’t have the oppressive 120-degree summer heat of Phoenix. And it really is a “dry” heat without the muggy humidity of Texas.

As if New Mexico’s minuscule 2.8 percent population growth was not pathetic enough, the details are even more troubling. Over the decade, New Mexico, a state with just over 2 million people, gained 103,506 people over the age of 65. Clearly, the state’s weather, inexpensive housing, and unique cultural offerings are attractive to a certain segment of retirees.

But over the same period, New Mexico lost 71,142 people 64 and younger, including 51,382 residents aged 24 and younger. This kind of population stagnation simply isn’t supposed to happen in the booming American Southwest. It is New Mexico’s slowest growth since statehood in 1912; and, to make matters worse yet, analysts believe that New Mexico could lose overall population when this data is collected again ten years from now.

Could New Mexico, with an ethnically diverse, rapidly aging, slow growing population, in some way serve as an early proxy for the nation as a whole? The United States population still grew by 7.4 percent over the last decade. How, then, did a state located right in the middle of the fastest-growing region of the country perform so poorly? More important, what can be done about it?

First, to begin to appreciate the extent of New Mexico’s problems, we must understand its lack of economic freedom. According to the Fraser Institute’s annual “Economic Freedom of North America” report, New Mexico is in the bottom quartile of U.S. states when it comes to the ability of its residents to keep their hard-earned money and face reasonable economic regulations.

All of New Mexico’s fast-growing neighbors are ranked higher. To be sure, this is notable but unsurprising: High levels of economic freedom are strongly associated with increased population growth.

New Mexico’s path to becoming the “sick man of the American Southwest” is complicated. Unlike California, another state with great weather and physical beauty, but terrible public policies, New Mexico has never been the “it” place to be. For its many flaws, California remains the country’s largest state in population, with dozens of the world’s most-recognizable companies headquartered there.

New Mexico has chosen a different path. Not only do we have no Fortune 500 companies headquartered here, but the state possesses only a few publicly traded corporate headquarters. Instead, since the end of World War II, New Mexico’s economy has been based on a combination of massive federal spending and a robust oil and gas industry.

Whereas California has numerous tech companies and their well-off employees to pay the state’s ever-increasing tax burdens, New Mexico remains among the poorest states in the nation. Of course, it shouldn’t be, but like California, bad public policy holds the land of enchantment back.

By any measuring stick, New Mexico is heavily dependent on federal spending. (According to WalletHub, it is more so than any other state.) Outside of Washington’s largesse, oil is New Mexico’s other major industry. Indeed, New Mexico is the third-biggest-oil-producing state in the nation. Depending on the year, it accounts for between 30 and 40 percent of the state’s budget.

One might expect that having two national nuclear labs — along with their highly educated and well-paid employees — would be a ticket to economic prosperity. Add, too, the billions of dollars in annual tax payments and the jobs and economic activity they bring, and it would seem to most outsiders that New Mexico should be the richest state in the region.

But it turns out that having sound, free-market public policies trumps massive federal “investment” and natural-resource wealth. New Mexico’s lack of economic freedom is a direct result of the state’s political leadership not wanting to do the hard work of adopting the free-market policies that would make New Mexico competitive with its neighbors.

It doesn’t have to be this way. With its excellent weather and numerous outdoor and cultural activities, New Mexico remains well-positioned for growth in the years ahead. The state’s fate ultimately lies with the voters who have to decide to elect politicians to the legislature and governor’s mansion who are prepared to enact the free-market policies on which growth depends.

The same is true for New Mexico as it is for California and various other states. Until a concerted effort is made to make the state more attractive as a relocation destination for businesses, it will continue on the same unhappy trajectory. Shedding ourselves of our unseemly title will require dramatic leadership changes. The only outstanding question is whether we’re willing to make it.

PAUL GESSING is president of New Mexico’s Rio Grande Foundation

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New Mexico Special Election Could Further Reduce Pelosi’s House Majority

The following appeared at National Review on May 4, 2021.

national-review-logo | Jennifer C. Braceras

Nancy Pelosi’s majority in the House of Representatives continues to shrink. The recent swearing-in of Republican Julia Letlow of Louisiana has taken the House Democrats’ majority down to 218–212. This means that Pelosi has a mere two-vote governing majority with which to push the Biden administration’s big-government agenda.

The GOP will soon have another chance to reduce Pelosi’s margin for error when voters in New Mexico’s first congressional district (which includes Albuquerque and its environs) go to the polls to elect a replacement for Biden’s newly minted secretary of the Interior, Deb Haaland, a Democrat. Early voting begins today, while Election Day itself is June 1.

The district is classified by many in the national media as a “blue” district that should safely remain in Democratic hands, and as recently as November 2020, Haaland defeated Republican challenger Michelle Garcia Holmes by an overwhelming 58–42 percent margin. The seat was previously held by New Mexico’s current Democratic governor Michelle Lujan Grisham, and before that, now–senator Martin Heinrich, also a Democrat.

But Republicans have faced challenges in candidate recruitment in recent years in this congressional district. The last time they had a truly top-notch challenger was in 2010, when Jon Barela lost just 52–48 to Martin Heinrich, and in 2009 Heather Wilson, a Republican, held the seat, having done so for a decade. With this race being the sole topic of a special election and so much at stake in Washington, this could be a much more interesting contest than outsiders expect.

The candidates to replace Haaland could not be more different. While there is a serious independent contender and the Libertarians technically have major-party status, the Republican and Democrat contenders are state legislators with long histories of voting on important policy issues. Republican senator Mark Moores has been in the New Mexico Senate since 2013. In addition to his prior experience as a staffer for various Republican officeholders Moores played offensive line for the University of New Mexico Lobos.

Melanie Stansbury, on the other hand, was unknown in the state until she ran for the New Mexico house in 2018. Her prior political experience was in the Obama administration’s Office of Management and Budget.

The legislative track records of these two candidates are also drastically different. For starters, Stansbury strongly believes that New Mexicans should have their tax burdens increased rather dramatically.

In 2019, she voted for HB 6, which subsequently became law. Among other provisions, the bill increased taxes on auto sales, imposed taxes on Internet purchases, and increased New Mexico’s personal income tax. Ironically, this tax hike took New Mexico’s top personal income-tax rate from 4.9 percent (set by former Democratic governor Bill Richardson and the Democrat-controlled legislature) and brought it up to 5.9 percent. Moores voted against the tax hike, but it was subsequently signed into law by Governor Lujan Grisham, despite the state having a surplus in excess of $1 billion at the time.

In their most recent legislative session, the New Mexico legislature was back to raising taxes, and Stansbury was more than happy to go along. Despite the COVID-19 pandemic and a state unemployment rate that remains among the worst in the nation, the combined forces of New Mexico’s resurgent oil and gas industry and the massive economic stimuli out of Washington again put the New Mexico budget comfortably in surplus territory.

Nonetheless, Stansbury and other Democrats in New Mexico’s legislature voted for and passed numerous tax hikes. HB 122, which failed after House approval, was subsequently folded into SB 317 and ultimately signed into law. Stansbury voted for the bills both times. The bills increase a tax imposed by the state on health-insurance premiums from 1 percent to 3.75 percent — a tax increase of 275 percent. Moores voted against the tax hike.

As if that were not enough to illustrate the stark difference between these candidates, Stansbury joined her Democratic colleagues in the New Mexico House to push even more egregious tax legislation in the form of HB 291. This bill which passed the House with Stansbury’s support would have again increased New Mexico’s personal income tax, this time to 6.5 percent, but (more problematically) would have revised the state’s personal income-tax structure to make the higher tax rates kick in at much lower income levels than under current law.

On top of this, the proposal Stansbury endorsed would have allowed property-tax assessments to increase by up to 10 percent annually if the property was not occupied by the owner. The current cap in New Mexico limits annual increases to the already-substantial rate of 3 percent per year. The measure was intended to target Texans with second homes in New Mexico, but it would have applied to apartment and condo dwellers as well.

Fortunately for New Mexicans, cooler heads prevailed in the (also Democrat-controlled) Senate Finance Committee, which eliminated the tax hikes from HB 291 before the bill passed into law.

These are just the tax hikes endorsed by Stansbury in her three short years in the New Mexico legislature. During her time in office, she has voted to ban local governments from enacting “Right to Work” laws on the local level, and she voted for New Mexico to abandon the Electoral College, saying instead that it should dedicate its five electoral votes to whatever candidate won the popular vote. The latter would have dramatically diminished what influence small-population New Mexico has in presidential races for no benefit aside from her ideology.

Stansbury is a true big-government radical. Her advocacy of big government in the New Mexico legislature places her to the left of Nancy Pelosi. At a time when every race matters in a closely divided U.S. House, conservatives cannot ignore this special election in a “blue” but winnable district.

 

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New Mexico session another missed opportunity

The following appeared in the Las Cruces Sun News on Sunday, March 28, 2021. UPDATE: Originally the article stated there was a production moratorium on federal lands. There is “only” a moratorium on new permits.

New Mexico is in one of the most unusual economic times in its history. Profound forces have impacted our State over the last year in unforeseen ways.

    • The Gov. and COVID shut down much of our State for much of the past year. COVID is declining, but New Mexico remains among the most locked-down states in the nation;
    • Oil and gas prices plummeted last April due to the pandemic and an international price war, but have come roaring back and produced $300 million in “new” money and a budget surplus;
    • Democrats in Washington recently passed a $1.9 trillion dollar “stimulus” that will dump an astounding $9 billion on New Mexico State and local governments. Meanwhile the Administration’s moratorium on oil and gas permits on federal lands will cost our State more than $700 million over the next few years according to Gov. Lujan Grisham;
    • While New Mexico governments are awash in money, businesses are struggling to recover. The State’s unemployment rate is 8.7 percent, 4th-worst in the nation.

To say we are living through unpredictable times would be an understatement. Oil and gas have always been volatile but are now more unpredictable than ever. This reflects broader economic uncertainty, but with the Biden Administration targeting the Industry, the Legislature must diversify our economy (this does not mean simply new sources of government revenue).

The unprecedented stream of federal spending flowing into our state is currently augmented by a flow of people. Housing markets are tight in most of our cities as Americans from big, expensive, states like California embrace remote work or simply move to states like New Mexico where they can spread out and buy a house for a lot less money.

Current trends are favorable, but long-term economic prosperity requires enacting policies that make the State more attractive as a business destination. The 2021 Legislature had a few successes but ultimately failed to enact policies that will bring long-term prosperity to New Mexico.

Despite a big budget surplus, the Legislature raised taxes on health insurance (SB 317). They imposed a new sick leave mandate on businesses, including small ones (HB 20). And, passage of HB 4, the misnamed “Civil Rights Act” will impose massive new legal costs on New Mexico governments without actually improving policing or protecting civil rights.

There were bright spots. HB 255 reformed New Mexico’s liquor licensing to make it easier for bars and restaurants long-term. HB 177 passed which allows New Mexicans to start micro-businesses by making non-perishable food items in their homes for sale.

But the gross receipts tax and its taxation of busines inputs and services remains a stumbling block for businesses. New Mexico also remains among a relatively small group of states that tax Social Security. No significant tax cuts or reforms were adopted. Also, no widespread reform of burdensome regulations (like the State’s “prevailing wage” law that artificially increases costs on public works) projects was enacted.

Some will argue that (after a decade of trying) tapping the Permanent fund to boost various education programs will help improve our workforce, but the track record of governments (including New Mexico’s) spending more money to boost education outcomes is spotty at best. Empowering parents and families with the resources needed to choose the educational option that is right for them (especially after a year of Zoom education), is more likely to succeed and at a fraction of the cost, but legislation to that effect was quickly defeated this session.

Microchip manufacturer Intel just announced that it is investing $20 billion in neighboring Arizona to build two new facilities. Such “economic diversification” is exactly what we need and what the Gov. and Legislature claim to want. Until the Legislature gets serious about reforming our economy we’ll continue riding the wave of luck, boom and bust in the oil patch, and Washington debt.

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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Bill Richardson’s tax cuts WERE a success!

It has now become an article of faith on the left in New Mexico that Gov. Bill Richardson’s 2003 tax cuts were a failure.Several tax hike bills including (at least) two that would raise New Mexico’s personal income tax rate have been introduced this session including:

SB 56: Sen. Bill O’Neill’s bill to increase New Mexico’s top personal income tax rate to 8.2% (the bill was heard in Senate Tax on Thursday);

SB 89: Sen. Bill Tallman’s bill to increase New Mexico’s top personal income tax rate to 6.5%;

You MAY recall that the Richardson cuts took New Mexico’s top income tax rate from 8.2% down to 4.9% over 5 years where it was until 2019. The cuts ALSO cut capital gains tax rates in half. These were REAL tax cuts and they passed the Democrat-controlled House without a single dissenting vote and passed the Senate by a margin of 39 to 2 and were signed into law on Valentine’s Day, 2003.

Richardson and Were Richardson’s tax cuts REALLY a failure? No. In fact, none other than the liberal “fact checking” site PolitiFact said that Richardson’s job creation claims (made in advance of his 2008 reelection campaign) were “mostly true.”

As PolitiFact noted in 2007,

Statistics from the Bureau of Labor Statistics indicate that New Mexico gained 75,800 jobs from December 2002 to July 2007, which is slightly lower than Richardson’s claim.

As our friends at FactCheck.org note in this article , Richardson has consistently cited the higher number, even when the actual number was lower.

For our ruling, however, we’ll rely on the current 75,800 and call it mostly true.

PolitiFact further quoted none other than NMSU economist (one of NM’s top economic gurus) Jim Peach approvingly.

Peach said Richardson’s tax incentives and income tax cuts have created a favorable atmosphere for business that is a stark change from the state’s mentality in the mid-1970s, when state officials refused to provide help to a promising young company named Microsoft.

The climate here has changed considerably since then, Peach said. Bill Richardson has been a big part of that. He’s not the whole story, but he’s been a big part of it.

The fact is that if Richardson were governor today he would be too conservative for New Mexico’s Democratic Party on both guns and taxes.

 

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Basic facts as legislative session gets rolling

The following appeared in Las Cruces Sun News on Sunday, January 24, 2021.

To say that this is an unprecedented legislative session in New Mexico is an understatement. After some public debate over how and when the Legislature was going to meet, the Democrats who overwhelmingly control both houses have decided to plow forward with an entirely “virtual” session.

The Roundhouse is closed to the public and if you want to engage with legislators or committees you need to get online and watch, testify, or send emails or calls to their offices. By itself this COVID-related change is both dramatic and problematic.

Then, in apparent reaction to the US Capitol riots of January 6 and the supposed threat of violence at state capitols across the nation, the Roundhouse has been fenced off with dramatically-enhanced security measures implemented to the point that only legislators and staff can get near the facility. We don’t know how long these measures will be in place, but this simply can’t be the “new normal.”

For all its many flaws New Mexico’s Legislature has traditionally been among the most open and accessible in the nation. We have advocated the addition of remote testimony in this vast, sparsely-populated State, but never at the expense of having in-person access completely eliminated during a session.

All advocates for open government must be vigilant in making sure that this crisis not be used to limit open government and transparency in our State.

And then there is the economy. We certainly want New Mexicans to be able to get back to work as quickly as possible. But as the Legislature meets to discuss long-term policy changes in our State we need to agree on a few important facts which undergird our economic situation and have done so for many years.

  • We know New Mexico is an impoverished state. Too many of our citizens and especially young people face hardships in the best of times. Of course, those problems have been worsened by the pandemic and the political reaction to it.
  • New Mexico lacks something called economic freedom. According to an annual report from the Canada-based Fraser Institute, a free market think tank, our State is the 42nd-most free state in the nation. Our neighbors are all much freer. Worse, because data are not available instantaneously the data available are for 2018, Susana Martinez’s last year in office. We have seen a dramatic erosion in economic freedom under the current Administration. Lack of economic freedom has real impacts on people. The study found an 8.1% reduction in median incomes in the least free states.
  • New Mexico’s tax burdens are heavy. Because it is poor and federal taxes are “progressive” many tools claim our State has low taxes. In reality, according to the Federation of Tax Administrators, when ranked as a percentage of personal incomes, New Mexico’s state tax burden is 7th-highest in the nation.
  • Given our heavy tax burden it will come as no surprise that state and local spending is high. In fact, according to com consuming 22.98% of our overall economy, New Mexico governments spend a smaller share of the economy than only West Virginia and Alaska.

During this 60-day legislative session we expect a slew of tax hikes, spending programs, and new regulations to be considered and passed. Unfortunately, those mostly take us even further in the wrong direction and will further make us an island of relatively slow economic (and population) growth and poverty in the American Southwest.

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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Some quick facts before the 2021 legislative session kicks off

As the first-ever “virtual” New Mexico legislative session kicks off we believe it is important for New Mexico policymakers to have some basic information about New Mexico’s economy.

  1. New Mexico tax burdens are not low relative to neighboring states. The chart below is from the Federation of Tax Administrators. With far heavier tax burdens than its neighbors, New Mexico’s tax burden ranks 7th-heaviest among states.
  1. According to the website US Government Spending state and local spending in New Mexico is far higher than in neighboring states as a percentage of the state economy (GDP). The data are constantly being updated, but New Mexico consistently has the biggest-spending state and local governments in the US.
  1. When it comes to raising the minimum wage, mandatory paid sick leave, or a variety of other economic policies, New Mexico lags dramatically. The data in the Fraser Institute analysis below is from 2018 which is the final year of Susana Martinez’ time in office. New Mexico desperately needs MORE economic freedom, not less.

4.. We already know New Mexico is among the poorest states in the US. If the Legislature is serious about reducing poverty and improving outcomes for children and the rest of the population (regardless of race or gender) it needs to have a serious conversation about economic freedom issues. like taxes and regulations.

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Netflix Fueled by Oil and Gas in New Mexico

The following appeared at National Review’s website on December 25, 2020

We have known for decades the extent to which progressives dominate Hollywood. In the age of social media, Hollywood celebrities waste no opportunity to show that they stand with the poor, the downtrodden, and the righteous. But they have a way of showing themselves up as the hypocrites we already know that they are.

Let’s start with “fracking.” Fact: a few years ago, more than 100 Hollywood A-listers signed on to an effort under the banner of Artists Against Fracking to ban hydraulic fracturing. Yet it’s no secret that many of Hollywood’s numerous well-heeled opponents of “fracking” have something of a weakness for private planes and, even in their humbler moments, for large SUVs. It’s not much of an exaggeration to think that some of them probably gobble up more energy in a day than average Americans do in weeks.

But without hydraulic-fracturing technology, oil and gas production in my home state of New Mexico would almost completely dry up. This industry has made New Mexico a major energy producer, a crucial source of revenue and jobs for a state widely recognized as one of the poorest in the country. Fracking has safely opened massive new energy deposits with production concentrated in the Permian Basin, located in southeast New Mexico and shared with Texas. In fact, New Mexico is the third-largest oil-producing state, with over 1 million barrels per day at the end of 2019One-third of the state’s entire budget is generated by the industry.

Too bad. If the nation follows the advice of Hollywood’s anti-fracking activists, a poor state and its poor residents will be denied the benefits of an important natural resource and simply go without. While fracking remains legal (for now) in New Mexico, Hollywood’s hypocrisy goes far beyond merely advocating against this technology: some of its leading companies have found a way to suck up tax revenues right here in New Mexico that would otherwise be spent on public schools, health care, and other government services.

In an effort to attain the glitz and glamour of Hollywood, New Mexico’s liberal politicians are handing out some of the most generous subsidies available anywhere to Hollywood film companies. That those companies tend to lean liberal is, of course, only a coincidence.

Netflix is the latest production company to bring significant operations to the Land of Enchantment. The streaming company recently announced that it would expand its operations in the state, spending an additional $1 billion in New Mexico over the next 10 years.

That sounds good, but however liberal it may be, the entertainment industry is still the entertainment industry, and the deal comes with a catch. Netflix may be spending in the state, but it will also be receiving a very generous incentive from the New Mexico taxpayer, something of an irony when one-third of the state’s taxes are paid by “wicked” oil and gas.

Netflix (like any film company that operates in New Mexico) is eligible to have 25 percent of its expenses reimbursed by the State. Better yet, the length of the company’s ten-year lease means it “qualifies” under state law to receive an increased reimbursement of 30 percent.

Just to be clear, if Netflix does indeed spend $1 billion over the next decade as it asserts, it could be entitled to checks from the New Mexico Treasury totaling $300 million. If 33.5 percent of New Mexico’s budget comes from oil and gas over that time period, Netflix alone will effectively be receiving $100 million directly from the oil and gas industry.

Of course, if the “keep-it-in-the-ground” wing of the Democratic Party prevails and bans fracking on New Mexico’s federal lands, the state’s oil and gas revenues could plummet, forcing the State’s other taxpayers to pick up more of the bill for Netflix or triggering some sort of crisis in its relationship with the company

Unfortunately, when it comes to subsidies for Netflix, $300 million is just the down payment. The state is also fronting another $17 million in direct incentives to Netflix while the City of Albuquerque is coughing up another $7 million. These funds come from something called the Local Economic Development Act (LEDA), commonly referred to as a “closing fund.” These are payments made by state or local governments to preferred industries. One might believe that in a state as poor as New Mexico (consistently among the nation’s poorest) that taxpayers picking up the bill for 30 percent of a profitable corporation’s business expenses would be enough.

As things seem at the moment, Netflix is going to continue to grow and over time it should create more jobs in New Mexico. That will generate all the usual headlines about how great the company is for the state and its economy, but it will come at a tremendous cost. That cost is not just in lost revenue, but in tax rebates borne primarily by state taxpayers. This subsidy is both unfair and unsustainable.

As one of Hollywood’s biggest businesses, Netflix is a member of that elite group of publicly traded stocks known as the FAANGs (Facebook, Amazon, Apple, Netflix, and Google). Netflix flaunts its rapidly growing profitability, but it is still prepared to consume massive taxpayer subsidies not only from one of the poorest states in the country, but from a state that can only afford to pay out those generous subsidies thanks to the revenues it receives from the oil and gas industry that so much of Hollywood condemns.

Senator Bernie Sanders is still a hero to many in the entertainment industry and, to be fair, he at least takes a principled approach to such corporate welfare. Unfortunately, the same cannot be said for many in Hollywood and Democratic politicians like New Mexico governor Michelle Lujan Grisham. She has locked our state in to paying Netflix outrageous sums of money over the next decade at a time of great uncertainty for New Mexico and its economic outlook and thrown away the key. That much of that uncertainty comes from her own party only piles irony upon irony.

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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A brief Rio Grande Foundation Analysis of PFM report on New Mexico’s tax structure (Part 2)

Yesterday we said we’d get an analysis of the PFM report on New Mexico’s tax code. As indicated in that post, there is some good information in the report even though we disagree with many of its findings. One of the best points made is the following which is taken directly from the report:Too often the only “equity” discussion that takes place is over “progressive” or “regressive” taxation. The PFM report acknowledges that New Mexico’s gross receipts tax is unfair to competing businesses within the same industries. As the text above points out this bias assists bigger firms and penalizes smaller ones.

Overall, the analysts seemed concern about the gross receipts and specifically argued for NOT raising rates on that tax. Unfortunately, that’s where the restraint went out the window. The report FAILED to mention New Mexico’s heavy (existing) tax burden (7th-highest as a percent of income) and bloated and inefficient government, yet it included numerous MAJOR tax hikes and NO tax cuts. The tax hikes mentioned included:

  • Higher marginal rates at higher income levels.
  • Eliminating the capital gains personal income tax exemption.
  • Re-institute an estate tax.
  • Increase the gas tax rate.
  • Establish a structure for taxing recreational marijuana (we support the policy, but of course this is still more government revenue).
  • Broaden the gross receipts tax base to include food and, for lower income taxpayers while enacting a revenue neutral refundable personal income tax credit.
  • Continue to expand excise taxes to align with new forms of goods or services, such as vapor products.
  • Consider a carbon tax or so-called “market-based approaches.”

While there are elements of some of these ideas that could be part of a broad-based, revenue-neutral tax reform plan, including “shifting greater local funding responsibility to property taxes and away from gross receipts taxes” the report is WAY too focused on generating more money for the State and focuses far too little on spurring economic growth and job creation.

Finally, although the overall report is lacking, one additional bit of good news is that PFM specifically calls out film subsidies. Again, the full text is below directly from the report:

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A brief Rio Grande Foundation Analysis of PFM report on New Mexico’s tax structure (Part 1)

Yesterday, a report called “State of New Mexico Tax Structure: Issues and Alternatives”was released by a firm called PFM Consulting. The report is worthy of a detailed analysis and it has generated several stories in the media.  

A few initial thoughts: 1) I’m glad they posted the report at a link that can be easily-accessed by the public and policymakers. 2) As these documents go it is relatively accessible in terms of its language. 3) Taxes are a very important component of public policy, BUT they are one of several policy areas that must be addressed to make New Mexico economically competitive. 4) Analysts and legislators of differing backgrounds can view the same data and have completely different conclusions. While the media have covered some reactions from policymakers, we will offer our insights in a 2nd post to be published tomorrow (December 17).

Here are a few charts taken directly from the report which illustrate New Mexico’s serious economic challenges:

  1. Over the last decade New Mexico’s neighbors saw much faster employment growth although we did outperform Alaska and Wyoming which the report includes by way of further comparison.

2. New Mexico faces deeper poverty challenges than any of its neighbors or Wyoming/Alaska.

3. Related to poverty, New Mexico’s median incomes lag.