Having spent trillions of dollars on economic stimuli and bailouts all while unemployment has continued to spiral out of control and jobs still scarce, it will be interesting to see what President Obama and Congress do regarding the estate or death tax. According to a new study (see release here), New Mexico could add some 8,930 new jobs at no cost to taxpayers if the federal estate tax were repealed. The full study is available here.
Not all taxes are created equal. The death tax disproportionately impacts small business owners and others who create large numbers of jobs. Eliminating this tax would go a long way towards promoting real job growth in New Mexico and around the nation.
Gerry Bradley of Voices for Children, the left-wing counterpart to the Rio Grande Foundation, had an interesting article in the Albuquerque Journal yesterday. In the article, he discussed so-called “tax loopholes.” Of course, one man’s tax loophole is what another would simply call an incentive. That’s because every tax creates perverse incentives and penalizes behaviors that society and politicians (not always the same) want to promote.
While I don’t necessarily agree with the specific changes as Bradley outlines them, particularly if these increased revenues are not offset by tax cuts elsewhere, his point that some objective analysis is needed before specific provisions are written into the tax code is a good one. The problem I have with Bradley’s entire point of view, however, is that he seemingly operates from the assumption that the government has a right to tax any and all activities that occur within the state and that we taxpayers should consider ourselves blessed to keep anything. We’d also love to see Voices for children take a stance against wastes of taxpayers money like the Spaceport and film industry.
Awhile back I blogged about CNBC’s Rick Santelli and his articulate rant against some of the federal government’s poorly-designed and unfair policies. During his tirade, Santelli talked about holding a “Chicago Tea Party” to protest these policies which are killing our economy and foisting massive debt on our children and grandchildren.
Well, Santelli has started something. In fact, there is now an Albuquerque Tea Party. The head of this effort, Charlotte Salazar, will be on our radio show, “Speaking Freely” which airs on AM 1550, this Saturday from 9:45 to 10:00am.
I also understand that a Santa Fe tea party is in the planning stages. Hopefully the concept spreads statewide as it already has nationwide.
Good like finding House votes on New Mexico’s legislative website. They’re not posted there and are never made available on the site, even in a historical fashion for past sessions. That’s one of the reasons the Rio Grande Foundation created NewMexicoVotes.org. We wanted average citizens and voters to know how their legislators were voting.
Yesterday afternoon, the New Mexico House voted for one of the largest tax hikes in New Mexico history, HB 346 which would increase New Mexico’s onerous gross receipts tax by 3/4ths of a cent. The final vote is available here. Remember your Rep’s votes come Election Day and be sure to tell your Senator what you think lest we wind up with an economy-killing tax hike on individuals and businesses.
In case you missed it, yesterday, the voters of Santa Fe rejected a tax hike. The real estate transfer tax was the only measure on the ballot yesterday and it would have imposed a 1 percent fee onto any portion of a home sale price higher than $750,000.
4,557 of the more than 8,400 voters who turned out in the election — about 54 percent — voted against higher taxes and the nascent but ever-growing activism organization Friends of Capitalism should be congratulated for stopping this unwise tax hike. We need more such grassroots organizations to come together around New Mexico. If you’re interested, we at the Rio Grande Foundation highly recommend and are willing to help you attend the National Taxpayers Union conference this summer. Activism works and if it works in Santa Fe (of all places) it can work in your community.
The fact that tax hikes are a bad idea right now is so self-evident that even Sen. Jerry Ortiz y Pino — one of the most left-wing members of the New Mexico Legislature — didn’t make an overt call for specific tax hikes in his recent column in The Alibi. Better still, I was not the only reader of The Alibi, an alternative weekly that is not exactly known for having many conservative or free market readers, who responded to Ortiz y Pino’s cloaked call for higher taxes.
My letter is the second one that appears on the paper’s letters page, but the one by Steve Davis makes many of the same points I do.
I say that Richardson’s return to New Mexico is a blessing for fiscal conservatives….
While most conservatives and libertarians seem to have nothing but scorn for Governor Richardson and his failed bid for Commerce Secretary (and subsequent return to New Mexico), I am optimistic. Why is that? First and foremost, as discussed on the front page of today’s Albuquerque Journal, Governor Richardson says he’ll balance New Mexico’s budget (subscription required) without raising taxes. He’ll rely on reductions in funds allocated through the Capital Outlay process as the main source of cuts, but says he will also target education spending.
While the ultimate results of Richardson’s new-found fiscal restraint and where it is coming from are up for debate, I believe that Richardson has far greater incentives than Diane Denish would to rely on spending cuts rather than tax increases in order to close the budget deficit. After all, Richardson has fashioned himself as a tax-cutter and thus has the incentive to preserve those cuts rather than raising taxes. Is there any debate that Diane Denish, were she to take office while inheriting Richardson’s budget mess and in need of support from a variety of liberal constituencies, would have every incentive to raise taxes and blame it on Richardson?
Of course, no one knows how the legislative session will pan out, but I can say that Republicans should unify around efforts to close the budget gap by cutting spending and not raising taxes.
The Rio Grande Foundation has been doing a good deal of work on New Mexico’s State Investment Council. The problem is, as I point out in a new column in the Las Cruces Sun-News is that the Council really doesn’t know what is going on with taxpayers’ money and has invested in some truly corrupt out-of-state businesses.
One of these businesses is known as Small Smiles which was investigated by a Washington, DC television station. The SIC’s 2007 annual report showed an investment of an unstated sum in this New Mexico company. By directly contacting the venture capital firm that handled this investment, the Rio Grande Foundation learned that about $500,000 New Mexico taxpayer dollars have been invested in Small Smiles.
Contrary to the SIC’s annual report, Small Smiles, is not a New Mexico company. It is a national chain of low-income dental clinics owned by a bank in Bahrain. Furthermore, at the time half a million taxpayers dollars were going to help Arab investors.
There is scant oversight of the SIC’s investment practices and decisions. Only when a big investment like Eclipse craters does the public learn of losses. It’s time the Legislature revisit the discretion it has given the SIC, and provide for greater transparency and more informed decision making. It should also ensure inescapable accountability for those who make the wrong calls in handling the public’s money.
“Tax Lightning” was first used to describe the shock a homeowner experiences upon receiving the initial property tax assessment from their respective county. It has since become more of an umbrella term to reference a larger problem: a severe property tax inequity among homeowners in New Mexico. When ownership of a property transfers, the property tax may be assessed by county assessors at current market value, pursuant to legislation passed in 2001 (HB 366). This has only become a hot topic in the past few years. People who purchased or developed properties at the height of the real estate bubble are paying inflated property taxes. Two property owners in the same district, perhaps even door-to-door, may be paying severely disproportionate property taxes. “Tax Lightning” remains an important issue; particularly with the 2009 state legislative session impending. This trend in property assessment at “current and correct” market value serves the budget concerns of county bureaucrats but chills our already weakened economy by penalizing home buyers.
While the weak housing market certainly makes it more difficult for potential home buyers to pull the trigger, the reality of “Tax Lightning” further hinders the market from returning to liquidity in New Mexico. A potential homeowner won’t enter the market because they face a significantly-increased property tax burden. While this is bad enough for those who are looking for bigger and better housing, the problem is even worse for current homeowner such as seniors, retirees, and those who simply need a lower house payment. Their incentive is not to downgrade to a smaller, more affordable house because they may wind up with a comparable monthly payment for a less valuable property, due to the new assessment and subsequent tax increase.
For some time now local newscasts, newspaper articles, and blogs have attempted to voice the concerns of those homeowners most directly affected by Tax Lightning. But the public outcry appears to have had little effect on this policy. Challenged assessments are continually shot down. The answer given to contesting parties has been the same, unaffected by public outcry: your property tax was assessed pursuant to the law. It follows then that new legislation is the only real means for change. Earlier this year, Senator Mark Boitano sponsored two bills addressing Tax Lightning which county assessors lobbied against. Bernalillo County Assessor Karen Montoya said that her office had considered the fiscal implications and determined that the State would lose too much revenue. The bills ultimately failed. In 2009, Senator Boitano and his colleagues will introduce new legislation that may be more amenable to the opposition. This new legislation may propose the following:
• Clarifying legal nuances regarding the formula to calculate property taxes and the definition of “current and
correct” and “valuation maintenance.” This may narrow the gap between those paying too much and those
paying too little.
• Applying yield control to debt service in addition to operating costs
• Maintaining a 3% cap regardless of a change in ownership
• Removing the 3% cap, reassessing all properties, and then imposing the cap again. Phase in the heavy
increase experience by some and the decrease experienced by others over a 4 year period.
It is clear that this issue is of great concern to those most directly affected. It should be of concern to everyone. It appears that legislation is the only way to interfere with the new trend in assessment. People are seeking shelter from the lightning storm. Concerns should be voiced to state legislators. The 2009 legislative session draws near, and with it a new opportunity to properly address this issue. The desperate state of our real estate market and the extreme dissatisfactions of property owners should be enough to influence legislation.
Regardless of how you feel about the results of the recent election, it would seem that taxpayers of all stripes should be concerned that government officials are able to tilt the balance of ballot elections by using tax money to advertise on behalf of those ballot measures. Opponents of higher taxes, like the Rio Grande Foundation, must rely on donated funds and are given no free resources or media platform to argue against these tax hikes and bond measures.
I wrote about this problem in this week’s edition of The Taos News.