Rio Grande Foundation
The Rio Grande Foundation has long opposed New Mexico’s film subsidies, so it was highly gratifying to have our perspective backed up by the Legislative Finance Committee’s report which found the subsidies to be ineffective at fostering economic growth.
KOAT Channel 7 did a story on the issue and gave RGF the best opportunity to explain some of the problems with New Mexico’s generous film subsidies we’ve ever had. Check it out here or below:
RGF president Paul Gessing recently sat down with KOAT TV Channel 7 to discuss Bernalillo County Assessor Damian Lara’s interesting approach to property tax assessments. The issue was discussed in more detail in a blog post here.
In addition to Gessing and Lara, the KOAT piece includes Doug Peterson, one of the largest landlords in New Mexico. While everyone wants to see properties maintained and filled with thriving businesses, those seem to be policy and enforcement considerations for the Mayor, City Council, and APD.
The following appeared in the Albuquerque Journal on July 30, 2023.
A recent editorial cartoon highlighted the vastly different approaches towards governance of New Mexico and Texas. The cartoon is of the state border circa 2030 as New Mexicans head to Texas for gas-powered vehicles (due to the recent regulations proposed by Gov. Lujan Grisham) while Texans visit NM for abortions and marijuana.
These are hardly the only differences between the two nowadays as Texas has no income tax or job-killing gross receipts tax, it is a right to work state, and state spending per-person is less than half of what it is in New Mexico. Not coincidentally, Texas is also one of the fastest growing states in the nation while New Mexico’s population is stagnant with young people leaving and being replaced by older people and retirees.
People have been talking about Texas’ economic success for decades, but a recent family vacation gave me the opportunity to see it firsthand. I have flown to several major Texas cities and have driven across the Panhandle more times than I care to recall, but this trip involved flying to Dallas and driving from all the way to Corpus Christi and the Gulf Coast. That’s a trip of over 400 miles including stops in major cities including Austin and San Antonio (in addition to Dallas).
We went deep in the heart of Texas and compared what we saw with our home state of New Mexico. Here’s what we saw.
Texas is booming. It provides a business-friendly environment and a government that does the basics well and at less than half the cost per resident.
While New Mexicans have a long-standing historical resentment of the Lone Star State, but the entrepreneurial, pro capitalist culture and polices clearly have a lot to be said for them. New Mexico can’t and shouldn’t be Texas, but we can also learn some valuable lessons from it.
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
“…In this world nothing can be said to be certain, except death and taxes.”
— Benjamin Franklin, in a letter to Jean-Baptiste Le Roy, 1789
We’ve all heard the quote before, but how have tax burdens directed economic growth in the United States over the last century? Our upcoming speaker Brian Domitrovic has co-authored the book Taxes Have Consequences: An Income Tax History of the United States, with Arthur B. Laffer, to answer this and other questions.
Domitrovic will join the Rio Grande Foundation to discuss American history, especially the past 100 years since creation of the federal income tax at a luncheon hosted by the Rio Grande Foundation.
August 8, 2023
Taxes Have Consequences
11:45AM – 1:00PM
Indian Pueblo Cultural Center
2401 12th St NW, Albuquerque, NM 87104
About Brian Domitrovic:
Brian Domitrovic is an intellectual historian interested in the history and development of supply-side economics. He is the author of six books, beginning with the now standard history of supply-side economics Econoclasts (2009) and extending to the history of the income tax Taxes Have Consequences (2022 and co-authored with Arthur B. Laffer and Jeanne Sinquefield). He has been a professor at institutions in Texas and Colorado and is the Richard S. Strong Scholar at the Laffer Center in Nashville. He holds a Ph.D. in history from Harvard University.
Tickets:
Tickets are limited. Price before July 28, 2023: $50
Price on and after July 29, 2023: $55
Price at the door if available: $60
Cancellation policy:
The Rio Grande Foundation will honor cancellation requests until July 31, 2023 at 12:00PM MT, 2023, minus a 15% transaction fee.
We discussed the details of the Mayor’s proposed mega-expensive $80 million bike trail here, but had a chance to offer a few thoughts in this story for KOAT TV Channel 7.
In summary, this is yet another “big ticket” taxpayer-financed project foisted upon us when what the City desperately needs is improved public safety and an improved economic climate (not to mention a better education system). A neon tumbleweed structure may be nice, but it is certainly not a core government function regardless of your broader thoughts on bike trails and Albuquerque’s extensive trail network.
Check out the story below:
The following appeared in the Las Cruces Sun News and numerous other newspapers on June 18, 2022.
According to New Mexico’s Tax and Revenue Department rebate checks (or transfers to bank accounts) will be going out at any time during the middle of June. At the Rio Grande Foundation we welcome the $500 or $1,000 (depending on single/married filing status). This is especially true at a time when inflation is rising faster than wages.
But New Mexico is in the midst of an unprecedented boom in its oil and gas industry and, while those checks are nice, they are a pittance relative to the windfall being experienced in State government. Worse, unless the Legislature and Gov. take concrete action and soon to diversify the economy, New Mexico will waste this unique opportunity.
First the numbers: according to the Legislature’s analysts, the one-time “cost” of the rebates is $667 million. You may recall that the Legislature began the 2023 session with a surplus of $3.6 billion and spent $1.2 billion of that.
Though new spending was “just” double the amount of the rebates, the reality is that almost all of the money not spent this year will be put into reserves to be spent in the future. That means that more than 80 percent of this year’s budget surplus will ultimately be spent (unless the Legislature enacts some real tax cuts in the 2024 session).
There are a few major points to be made:
Like all New Mexicans we at the Rio Grande Foundation welcome these rebates. What we are looking for out of Lujan Grisham and the Legislature is some kind of coherent economic strategy (besides simply spending more money). It is time to translate our oil and gas wealth into prosperity for ALL New Mexicans. That requires average New Mexicans to engage with and hold this Legislature and Gov. accountable for their policy decisions.
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
The following appeared in the Roswell Daily-Record on May 21, 2023.
The 2023 New Mexico legislative session was generally disappointing for New Mexicans who wish to see much-needed K-12 education reform. However, it was not a total loss. In fact, one bill did pass that could help thousands of New Mexico families pay for educational options that work best for them. Without a single “no” vote during the 2023 session, HB 342 will soon be the “law of the land.”
The bipartisan bill was sponsored in the House by Republican Minority Leader Ryan Lane and by Democrat Majority Leader Peter Wirth in the Senate. It was signed into law by Gov. Lujan Grisham, also a Democrat. HB 342 aligns New Mexico law with federal law as updated during the Trump Administration and recent legislation under the Secure 2.0 Act.
Over the years Congress has expanded the use of 529 plans to pay for kindergarten through 12th grade tuition and included student loan repayment and apprenticeship program expenses. And in 2023, Congress added a provision to allow rollovers of unused 529 plan funds into a Roth IRA for the beneficiary.
Starting on June 16 when this new law takes effect, New Mexico families will be able to deduct any contributions to their New Mexico sponsored 529 account that will be used to pay for up to $10,000 annually (per-child) on tuition expenses at an elementary or secondary public or private school (making them “qualified” expenses under New Mexico law).
Originally created to help families save for college, 529 plans have been helping families do that for years and will continue to do so into the future. For New Mexico residents, features include the fact that 100 percent of contributions to New Mexico’s plans are deductible from state taxable income in the year contributions were made to the account. If the account owner is a resident of New Mexico, then earnings and withdrawals from their 529 account are also exempt from state taxation.
New Mexico’s educational woes have been well-documented in numerous analyses. Families who are considering 529 plans or if they already have such a plan and want to know more about the latest changes can find out more at The Education Plan website https://theeducationplan.com. The Education Plan is New Mexico’s state-sponsored 529 education savings plan.
The website is informative and Rio Grande Foundation has undertaken its own efforts underway to educate New Mexicans, but it is up to families to either find this information for themselves or talk to a financial advisor.
If you have a child for whom the existing K-12 system is not working and you are considering the financial challenges of paying for school (in addition to the taxes you already pay to fund the schools), you should strongly consider looking at using a 529 plan.
This is especially true since the original purpose of 529 plans may not be as critical as in the past. That’s because many college costs in New Mexico are now covered thanks to the State’s “Opportunity Scholarship” program for “free” college. While nothing is truly free, the prospect of college being heavily subsidized by New Mexico taxpayers may change the financial equation for some New Mexico families who no longer need to prioritize saving for college and instead can use their 529 plan for K-12 tuition at a non-public school.
The Rio Grande Foundation has long been a proponent of increasing the educational options available to New Mexicans. While much work is to be done to improve educational options for families, we are pleased that New Mexico’s Legislature is allowing families to maximize the benefits of 529 plans for K-12 students. It is critical for parents of school-aged children to educate themselves on the benefits of these plans.
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
The following opinion piece appeared in National Review’s Capital Matters on May 1, 2023.
Study after study shows that people who win lotteries often fritter away the newfound wealth and wind up no better off than they were before. States don’t win lotteries, but New Mexico recently came as close as a state can.
A recent report from Pew found that between January 2020 and June 2022 no state saw faster growth in tax revenues than New Mexico. In late 2022, budgetary analysts started telling New Mexico politicians that they were in for an even greater “gusher” of revenues. That’s thanks to the state’s share of the Permian Basin, which has led to New Mexico becoming the second-largest producer of oil in the nation. New Mexico’s oil production has approximately quintupled since about 2011
For a state with just over 2 million people, this kind of boom has led to an incredible amount of money flowing into state coffers relative to the size of the state budget. Budget analysts at the end of 2022 said that state revenue would exceed spending obligations by 43 percent, with revenue rising to nearly $12 billion.
One might compare such a windfall to winning the lottery. Unfortunately, according to the National Endowment for Financial Education, 70 percent of lottery winners go bankrupt within a few years. New Mexico hasn’t gone bankrupt and, as long as the oil-and-gas money continues flowing, it will continue to have money. But New Mexico continues falling further behind economically.
The state is a cautionary tale that budget surpluses are nice, but even massive budgetary windfalls like New Mexico’s can fail to improve a state’s economic situation.
New Mexico has been a “blue” state since 1930. Over the last nearly 100 years, the state has had its share of Republican governors, but rarely even one house of the legislature under GOP control. Since Herbert Hoover was president, New Mexico’s GOP has never controlled both houses simultaneously. It has always been a poor state with an economy reliant on federal spending and natural resources. That could still change (if the state’s politicians get their act together).
Alas, alleviating New Mexico’s poverty (it has the nation’s third-highest poverty rate) will require “progressive” policymakers to suddenly figure out basic economics. Otherwise, all this oil-and-gas revenue is going to be frittered away with little or no improvement in the state’s dismal rankings.
Lottery winners didn’t suddenly work harder or become better at managing money overnight. So, when presented with a large amount of unearned wealth, they tend to make poor decisions. And all that brings New Mexico’s politicians to mind.
Take the recently completed New Mexico legislative session as Exhibit A. When presented with a budgetary windfall, what did they do? Believe it or not, the first versions of a big tax bill included several tax hikes. Initial versions of an “omnibus” tax bill introduced in the New Mexico Legislature included:
There were some modest reductions of New Mexico’s peculiar gross receipts tax, however even those reductions were to be phased in over four years and were made contingent upon future tax revenues meeting current record-breaking levels.
In the end, this bill, which was put together and passed by New Mexico’s overwhelming Democratic legislative majorities was (mostly) vetoed by Democrat Governor Michelle Lujan Grisham.
She could have taken a stand for free markets by just eliminating the bill’s proposed tax hikes. Or she could have done all manner of other things with the bill. Ultimately, what became law were one-time tax “rebates” of $500 or $1,000 depending on filing status, a boost to the already-generous film subsidies, a “refundable” child tax credit that mostly amounts to spending, and—this was welcome –-ending taxation of deductibles and copays paid to medical professionals.
In the end, most of the surplus was retained or used to add to New Mexico’s already bloated state government. Spending grew by another $1.2 billion in the latest budget thanks to a 14 percent year-over-year increase.
As you can probably imagine none of this is going to inspire businesses or citizens to flock to New Mexico. Narrowly avoiding a slew of tax hikes while in posession of the largest surplus in state history is at best a reiteration of the state’s broken “progressive” politics which have done so much to keep the state impoverished for decades. That the state is taking this tack at a time when neighboring Texas, Utah, Colorado, and Arizona have been cutting taxes only makes matters worse.
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
The following opinion piece appeared in Las Cruces Sun News and other papers recently.
In her message in which she explained her veto of large portions of the Legislature-passed tax bill, Gov. Lujan Grisham wrote, “Although HB 547 has many laudable tax reform measures, I have grave concerns about the sustainability of this tax package as a whole.”
She wrote this while the State of New Mexico sits on a $3.6 billion budget surplus thanks to oil and gas revenues (a boom that shows no signs of slowing down). She also signed a 14 percent budget increase which grew the size of government by $1.2 billion and included everything from increased film subsidies to $10 million for an abortion clinic primarily to serve Texans. Last year’s budget increase was over 13 percent as well.
The “tax reform” effort in Santa Fe got off to a bad start when the House didn’t seriously attempt to reform the unfair and job-killing “pyramiding” of the gross receipts tax. That “original sin” of New Mexico tax policy (reform of which was supported by the Gov.) should have been the Legislature’s top priority. It clearly was not, and it was never included in any version of the bill.
Worse, instead of just cutting taxes, both houses of the Legislature sadly included tax increases in versions of the bill including the final version. Raising taxes is inexcusable with a $3.6 billion budget surplus. Worse still, the tax hikes included anti-economic-growth policies like imposing two new top rates on personal income and increasing both capital gains and corporate income taxes.
Each of these tax hikes would have done great harm to our economy. The Gov. was right to veto them. Gov. Lujan Grisham’s tax policy agenda is hardly above reproach, however. The Legislature initially planned to reduce the GRT by 0.5 percentage points. This should not be mistaken for reform, but it is much better than nothing. Reducing the GRT also fits nicely with “progressive” economic policy goals as the GRT is a classic “regressive” tax meaning that poor pay a higher percentage of their incomes on it.
But, in the waning days of the session as the Gov. expressed concerns about the size of the tax package legislators adjusted the package by phasing-in the gross receipts tax reductions “to make room for” the film subsidies which had been added during the legislative process.
It would be hard to come up with worse tax policy than delaying broad-based tax relief to pile even more generous subsidies on top of those already given to a favored special interest (Hollywood). Adding insult to injury these GRT rate reductions were vetoed by the Gov. while film subsidies were left intact.
The best that can be said for tax package is that New Mexicans will get one-time rebates and medical doctors will no longer be taxed on deductibles and copays.
Watching the many twists and turns of the tax bill in the 2023 session highlighted that New Mexico’s political leadership simply does not understand basic economics. Given their ignorance, it is no wonder New Mexico performs so poorly economically. And it’s not just the Gov.’s vetoes, but the Legislature’s approach which was misguided from the start.
Economically, the 2023 session was a big disappointment. But, unless something dramatic happens, the State will likely again be awash in oil and gas revenues when the 30-day session rolls around next January. Can the Legislature and Gov. come up with a real tax reduction plan that will diversify our economy and move New Mexico out of last place?
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
As usual, Albuquerque Journal cartoonist John Trever summarizes the situation perfectly with his cartoon from Sunday, April 19, 2023.
Here are a few notes about the final tax bill as line-item vetoed by Gov. Lujan Grisham. New Mexico had a $3.6 billion surplus going into the session. The Legislature originally allocated $1.1 billion for “tax cuts.” $1.2 billion of that $3.6 billion was for new spending. That means over $1 billion would have been set aside for the future. The point is that (contrary to MLG’s veto statements about having anxiety over future revenues) plenty of money was available.
To her credit, MLG vetoed all the tax hikes in the bill (corporate, capital gains, alcohol, and tobacco), not just the tax cuts.
Here are the so-called “tax cut” provisions approved by the Gov. in the final bill (we used the 2027 fiscal impact for the tax/spending bills):
So, here are the tallies for what happened to New Mexico’s $3.6 billion surplus:
1) $1.2 billion or 33% was spent (adding in film subsidies and refundable child tax credit as spending;
2) $667 million or 18.5 percent of the surplus was returned in the form of one-time “rebates.”
3) $50 million or 1.4 percent comes in the form of “recurring” tax cuts.