LFC report: New Mexico sees limited benefit from economic development incentives
According to a new report from the Legislative Finance Committee New Mexico’s economic development incentives aren’t very effective. According to the LFC, “The $520 million the state of New Mexico spent on tax breaks for economic development in fiscal year 2025 didn’t generate much of a return.”
“The state’s economy, as measured by the gross domestic product, grew just 1.4% as a result of the more than half a billion dollars committed to the 24 tax exemptions, deductions, credits, and other benefits for business and business activity,” according to an LFC newsletter.
We would need to see the full analysis before agreeing or disagreeing with the report’s conclusions, but here are a few thoughts:
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- Tax breaks ARE NOT spending. Letting people (and businesses) keep their own money should not be called or considered “spending.” The LFC should change its language.
- Related to #1, film subsidies are spending. LEDA is spending, but offering tax credits for certain investments is NOT spending and is both economically and morally better. Lowering tax rates or even eliminating certain taxes is the BEST tax policy.
- Reducing taxes or providing economic incentives generally will not INCREASE government revenues. That is NOT a good reason to reject them. New Mexico government is sitting on more than $70 billion in its permanent funds and has seen budget growth in excess of 75%. That spending and that permanent fund haven’t improved New Mexico’s status. Robust tax cuts will (and have).
- If the Legislature and Gov. wish to improve on these economic outcomes they should do the following: Eliminate payouts for economic develop, carefully evaluate ALL tax credits and deductions for performance and desirability, and focus instead on lowering taxes across-the-board using the state’s considerable revenues.
