Our friends at the Institute for Truth in Accounting have put together, in honor of St. Patrick’s Day, a list of “gold-digger” states, those for whom federal revenues form the largest percent of their budget. Not surprisingly, New Mexico is on the list at number three. What is perplexing is just how great that reliance on Washington has grown in recent decades.
Stephen Moore was, until recently, an editorial board member of the Wall Street Journal and is now Chief Economist at Heritage Foundation. He spoke to a luncheon sponsored by the Rio Grande Foundation about what needs to be done to turn New Mexico’s economy around as well as what can be done to improve the United States economy.
Click here for Moore’s slides. Video of Moore’s presentation can be found below:
Stephen Moore discusses economic prescriptions for New Mexico and the United States on March 14, 2014 from Paul Gessing on Vimeo.
For even more information, check out the story Capitol Report New Mexico published on the event which included an interview with Moore.
Only in New Mexico and only under former Gov. Bill Richardson would the government hire consultants for a study that doesn’t exist. I was interviewed by KRQE Channel 13 for a story relating to Richardson’s efforts, specifically the commissioning of a $166,000 feasibility study, to determine whether New Mexico would be a likely location for an NFL team.
Now, I am a big NFL fan (Go Steelers!), but I could have outlined why New Mexico can’t support a team for a tiny fraction of that cost. After all, the Metro population of Albuquerque is about 750,000, making it the smallest of any pro-sports town in the nation outside of Green Bay, a city located in a relatively populated, wealthy state, and not too far from Milwaukee. This is a list of the 10 smallest pro-sports cities by state.
See the report from KRQE below which ultimately came to the same conclusion (and was thus spiked without so much as a written report being issued) for about $165,975 more than I just spent to figure this out:
Today, the papers reported on an absurd New Mexico law that prohibits “direct from manufacturer” sales of automobiles in New Mexico. As I recently wrote, while it would be great if they located their factory here, there are plenty of reasons to be skeptical about Tesla’s reliance on subsidies and its business model.
Of course, when it comes to government policies and Tesla, it cuts both ways. In fact, New Mexico law basically invalidates the company’s entire business model of selling its cars directly to consumers (we’re not the only state that does this). I’m SURE this regulation has nothing to do with preserving the business model of a powerful special interest group (auto dealers) at the consumers’ expense and the expense of innovative business models like Tesla’s.
I’m also absolutely positive that a company looking to make a massive, $5 billion investment, would NEVER decide to take their business to a state where their business model is legal as opposed to one where it is not…like a gun manufacturer moving out of a state (New York) where the Gov. has declared them and their ilk “unwelcome” and adopted some of the toughest laws regulating their industry.
The point is that New Mexico’s economy is unnecessarily hamstrung by burdensome regulations. We’ve critiqued a slew of those regulations here and here. The average citizen doesn’t understand anti-competitive regulations and how they harm them. The average policymaker (even really good ones) don’t relish taking on well-organized special-interests head-on.
The truth is that job-killing regulations are found throughout New Mexico Law. This is just the latest one to be discovered by the media and the public. I admit to not knowing that New Mexico prohibited “direct to customer” sales of vehicles, but was aware of the recent New Jersey ban. Perhaps policymakers can be convinced to take on at least some of these special interests in order to advance New Mexico’s flailing economy?
The City of Albuquerque is seriously considering a bus rapid transit (BRT) system on Central (and possibly in other corridors of the City). And, while we have a general idea of the total costs of construction ($85 million picked up by the City with $340 million picked up by federal taxpayers), we have no idea what the system would cost to maintain, nor do we have any idea whether the proposed investment is needed or how dedicating a lane of traffic along Central to just buses would impact other users (motorists, bicyclists, and pedestrians). Nor do we know exactly how much the proposed project would reduce in terms of commute times along Central.
While the Mayor is certainly correct in advocating less-expensive BRT over the light rail plan of his predecessor, that doesn’t mean BRT is needed or that it will have a net-positive impact on congestion (or economic development) along Central. As transportation analyst Randal O’Toole (generally a supporter of BRT) notes, “Unless the BRT line carries more new transit riders than the vehicles that once used the transformed lane, the resulting loss of roadway capacity leads to increased congestion.”
It is not as if the City of Albuquerque or Washington have money burning a hole in their pockets. As one recent commenter noted, there have been several security incidents on buses around town recently, “Sorry, Mr. Mayor, but the ‘next logical step in public transportation’ is a massive increase in public safety onboard the existing busses — more cops and fewer drug addicts and mentally ill who currently make riding the Rapid Bus along Central a non-starter for most citizens.”
As usual, we’ll keep an eye on things and weigh in as details emerge and the process moved along. At this point there are many questions left unanswered.
Over the weekend (Sunday’s paper), the Albuquerque Journal Money section included an article about the large number of New Mexicans living on the edge of financial disaster. The story centered on the Asset & Opportunity Scorecard which was created by the Corporation for Free Enterprise Development based in Washington, DC.
I don’t find too much to argue with in terms of the findings of the organization’s report card (which ranked New Mexico 42nd in terms of outcomes when it comes to New Mexico. It is no surprise that New Mexico performs relatively poorly in terms of financial security. After all, we’re among the poorest states in the nation. It’s hard to be financially-secure if you don’t make much money in the first place.
Unfortunately, the report’s authors’ showed their ignorance of how wealth and financial security are generated in the “policy recommendations” section of its report. Rather than emphasizing wealth generation and economic opportunity, the report’s recommendations focus (in general) on redistribution and expanding government. While a number of the recommendations are benign, there are several that show a left-wing bias. States are given points for:
Having an income tax (I’m not sure how that contributes to overall financial security;
Regulating paid tax preparers;
Having a minimum wage that is higher than the federal rate and indexed to inflation;
Providing taxpayer-financed loans for beginning farmers;
Expanding Medicaid under ObamaCare despite no evidence that Medicaid improves health care outcomes;
Proving taxpayer-financed pre-K, all-day-kindergarten, state-funded Head Start, and higher-than-average spending on K-12 education;
Ultimately, it would appear that the report is just another attempt by a well-funded liberal organization to influence states to adopt misguided economic policies. The fact that New Mexico comes in 26th should be of little comfort when you consider that New Hampshire, a state that outperforms New Mexico in nearly all economic and educational outcomes, nonetheless performs poorly on the group’s policy recommendations.
It is the talk of New Mexico that we’re in the running for a Tesla “gigafactory” that would produce batteries for the company’s vehicles. I’ll take this opportunity to say that we at the Rio Grande Foundation would LOVE to see Tesla set up shop here in the Land of Enchantment. It could be a true game-changer for New Mexico’s economy and a feather in the hat of Gov. Martinez’s administration.
However, as with everything, there are some caveats and details that we hope New Mexicans and their economic development specialists will consider as they work to land this “big fish.”
Giving tax breaks and incentives, even very aggressive ones like a blanket exemption from New Mexico’s onerous gross receipts tax, is okay. Allowing them the cheap or free use of land is okay. Spending significant tax money to build facilities or infrastructure is not okay. Offering the first two poses relatively few risks for New Mexico taxpayers in the event of a failure by Tesla or a decision to move for some reason. True, some costs will be shifted onto the rest of us and the land could theoretically be used for something else, but Tesla employees will also be paying a lot of taxes to work at the facility. That will benefit the state. Taking money from other taxpayers to finance Tesla’s building construction or plant could leave us holding the bag should things not pan out.
And, just to be clear, there are several significant risks to Tesla’s business model including whether lithium-ion batteries truly are the future. They also have some serious environmental issues that are often ignored.
Lastly, Tesla’s viability as a company is heavily-dependent on generous federal and state subsidies (yet another government subsidy for the rich that the left conveniently ignores). Should the political winds shift against Tesla or electric cars as they are slowly doing on ethanol, Tesla could implode entirely. This would leave New Mexico taxpayers on the hook as it is unlikely Tesla will set up shop here with onerous clawbacks.
With all of the energy policy focus on the Obama Administration’s indecision over approval or lack thereof of the Keystone XL pipeline, the issue of LNG exports had been lost in the shuffle (The Obama Administration has been indecisive on that front as well). As it turns out, all it took to get the issue back to the top of people’s minds is geopolitics and Putin’s invasion of the Ukraine.
Unfortunately for advocates of free market economic policies, mere jobs and economic growth were inadequate as a tool of placing pressure on the Obama Administration to act, but now, none other than House Speaker Boehner is in the Wall Street Journal demanding action from Obama on LNG exports. We certainly welcome the added pressure on behalf of good economic policy and agree that even the decision to export LNG could make Putin take notice. Hopefully, as the geopolitical situation changes, the pressure to export LNG will build to the point of policy changes.
Did you know that Washington State has the highest minimum wage rate in the nation ($9.32 an hour)? It is also a relatively healthy state economically-speaking according to this article from Bloomberg. As an aside, Washington has not one, but two, big-time entrepreneurs with New Mexico ties…two of the richest men in the world: Bill Gates and Jeff Bezos.
Does Washington State’s economic success mean that minimum wages aren’t harmful or that they are actually good? Of course not. It just means that other aspects of Washington’s policy/social climate are more attractive. Remember, minimum wages are one, small economic policy. And, while proponents of the free market may oppose them on principle, because they disproportionately impact low-income workers, by definition, the impact of minimum wages on the overall economy is relatively small.
What’s not small? How about the fact that Washington State has no personal income tax?
As Art Laffer and our upcoming speaker Stephen Moore noted in a paper done for RGF, having no personal income tax results in both greater economic prosperity and population growth. In other words, the positive impact of not taxing the productive activities of 60+ percent of the population that works (thus encouraging more of them to enter the work-force because they can keep more of their money) is far more important to a state’s economic growth than the tiny fraction of workers that make the minimum wage (or anywhere near it).
In other words, even though I remain 100% convinced that minimum wages are bad policy, I’d happily accept an increase in New Mexico’s minimum wage to $10 an hour or more in exchange for elimination of the personal income tax.
Southwest Organizing Project has submitted a petition to the Albuqueque/Bernalillo Air Quality Board which would require onerous new restrictions on businesses applying for permits. Specifically, applicants would be forced to pay for air quality monitoring with the permit not approved until after the reports were done. In other words, this is yet another costly impediment to doing business in Albuquerque.
In addition, the applicant would be subject to a lawsuit by any individuals who believed that they would be harmed by the project or proposed project, to compel compliance with the proposed regulation.
This is a very brief, simplified explanation.
This petition will be heard by the Air Quality Board on March 12th at 5:30 PM in the City Council Chambers in the basement of City Hall. It is open to the public and SWOP has been encouraging their supporters to attend.
You can submit a letter to the Air Quality Board in opposition to this Petition.
1. Email a letter to Margaret Nieto, Control Strategies Supervisor – Nieto, Margaret E. mnieto@cabq.gov (By March 6th if possible so it can be distributed to Board members, but it will received and recorded after that date)
2. Attend the meeting on March 12th to submit your letter and speak if you would like.
March 5, 2014
Margaret Nieto, Control Strategies Supervisor
Albuquerque Bernalillo County Air Quality Control Board
PO Box 1293
Albuquerque, NM 87103
Dear Ms. Nieto:
The Albuquerque-based Rio Grande Foundation respectfully requests that the Air Quality Board deny the “Petition to Amend Title 20, Chapter 11 of the NM Administrative Code”, submitted by Southwest Organizing Project.
It is hard to see this Petition as anything but a solution in search of a problem. Albuquerque’s air quality is considered to be very good. In 2013, it was named as 9th-cleanest city in America by the American Lung Association for year-round particle pollution.
Rather than cleaning up our already-clean air, this proposed Petition would provide another major hurdle to a wide range of commercial development in our City, due to both added exorbitant costs and time issues. Although the Petition claims to be interested in improving the quality of life in low-income and minority neighborhoods, its proposed mandates would, in fact, eliminate new jobs and services by driving new and expanding businesses out of the city and county. These requested regulations will severely damage the economic viability of the city and county as a whole, disproportionately impacting low-income and working-class residents of our City.
This Petition would not only affect small businesses like dry cleaners but also any business engaged in manufacturing. It would affect most buildings over 6 stories and many medical facilities since most must have a generator for life safety issues, and generators require a permit. It would affect any construction projects which must apply for a Fugitive Dust Permit and which, according to city staff, is a form of an air quality permit. This Petition’s reach would be sweeping and devastating.
This Petition, promoted under the guise of cleaner air, does significant harm and little, if any, good. It is a serious threat to our fragile economy, and, again, we urge you to deny the Petition at the March 12th meeting.
Sincerely,
Paul J. Gessing
President
Rio Grande Foundation
“Taxes, credits make NM Competitive” screams the headline from today’s Albuquerque Journal. The article by Winthrop Quigley discusses a new report from the New Mexico Tax Research Institute (NMTRI) which found that after accounting for the myriad tax credits and incentives enacted in the Legislature (largely at the behest of Gov. Martinez) New Mexico’s tax burden on businesses is the lowest in the region.
It’s an interesting study that is certainly worth a read. NMTRI does some great work. I can’t really say that I put much credence in Ernst & Young’s work since their findings that New Mexico’s film subsidy program generated $1.50 for each dollar spent, but I’m willing to give them the benefit of the doubt in this case. Nonetheless, it is worth recognizing the acknowledged limitations of this study. As the authors note, “New Mexico’s broad gross receipts tax base when combined with relatively high rates results in more pyramiding of tax than other states’ sales tax structures, increasing the cost of purchasing goods and services in New Mexico relative to others states.” RGF has analyzed tax pyramiding’s negative impact, so I’d label this a fairly significant shortcoming.
The good news of course is that, regardless of whether we are actually the lowest-business-tax state in the Southwest or not, New Mexico does seem to be moving in the right direction under Gov. Martinez. This is good news.
Other studies aren’t so favorable when it comes to business taxes. The Tax Foundation put us at 38th. The Small Business Survival Index puts us at 27th.
Business taxes are notoriously complicated with “sales factors,” gross receipts pyramiding (in New Mexico’s case) and targeted incentives being thrown about in ways that just aren’t as common in other areas of taxation. It would seem that if in fact New Mexico has a reasonably low overall tax burden on businesses that policymakers might want to take the step of reducing inefficiency by replacing many of these incentives and special provisions with low, flat, fair, and simple tax policies.
I’m not saying this will be easy, just that I think this is an area demanding more study and additional reforms. Kudos to NMTRI for taking such a knotty issue on. Hopefully the folks at Tesla see this analysis as justification to build their factory here.
The “social cost” of carbon may seem like an extremely esoteric issue. You can find the EPA’s discussion of the issue here. It is important to federal agencies, however, as they make regulatory decisions on permitting for activities that radical environmental groups want to stop.
As seems to happen frequently these days, the Obama Administration took action to politicize the issue of the “social cost of carbon” by ratcheting up the “cost” up in some otherwise innocuous regulations that otherwise dealt with the energy efficiency of microwave ovens (another unnecessary government overreach). Thankfully, under pressure, the Obama Administration did agree to open this particular regulation to comments rather than simply plowing forward with an abject lack of transparency and input.
The Rio Grande Foundation joined several other free-market organizations in providing comments to the Office of Management and Budget (OMB).
With all of the uncertainty over global warming and its economic and societal impact, it is nearly impossible to come up with a realistic number. What is known, however, is that arbitrarily increasing the “social cost of carbon” could be used as a bludgeon to kill economic development and jobs in the United States.
Recently, in the Albuquerque Journal and then in the Las Cruces Sun-News, a column I wrote on inequality and poverty was published. In it, I made the case that inequality is an amorphous and hard-to-attack problem, but poverty is clearly defined and worth our attention. Furthermore, poverty is best addressed through free markets and limited government.
Needless to say, the column received a strong response. In today’s Journal, my old debate opponent Nick Estes argued that jobs and economic growth are needed to cure inequality. First off, I agree with Nick that economic growth is imperative for raising living standards across all income levels. The main difference we have is that he sees government economic stimulus as the best means of achieving that end. As the chart below illustrates, federal government spending is at historically-high levels as a percentage of GDP:
Estes is simply trapped in the Keynesian mindset that government spending is needed to “prime the pump” when it comes to our economy when in reality, government diverts resources away from the private sector and into less beneficial, government programs. And, if federal spending helped reduce inequality as Estes posits, we’d see greater equality, not greater inequality.
Another response came in the form of a letter to the editor in the Sun-News. The writer basically argues that because we have a progressive federal tax system and rich people who believe that income inequality is important. The author seemingly claims that raising the minimum wage will have a dramatic, positive impact in terms of reduced inequality.
Lastly, there has been an ongoing discussion in the Albuquerque Journal’s Business Outlook section in which I was accused of not backing up my writing with data. I find that suggestion to be laughable. All this opposition is wonderful. It is a sign that my work is hitting its mark and forcing people to think about the issues. In other words, I’m doing my job.
(Albuquerque) Prior to the 2014 legislative session, the Legislative Finance Committee called for 1.5 percent pay hikes for all New Mexico government employees. Gov. Martinez proposed more modest pay increases. Rather than seeing pay increases for all state employees, Martinez planned to boost pay for about one-third of public workers. New teachers would have received higher pay.
In a “compromise” plan the likes of which are only found in government, the Legislature-passed- budget includes 3 percent cost-of-living salary increases for state agency workers and teachers.
Judges, district attorneys, state police and motor-transportation officers would receive 8 percent raises while prison guards, juvenile-justice officers, social workers handling child abuse cases and educational assistants in schools would get 6 percent pay increases.
In other words, the Legislature took its own proposed pay hikes and doubled them…or more.
Ironically, these proposed pay hikes come at a time of conflicting evidence over whether New Mexico’s government workers are overpaid or underpaid.
According to a recent report from New Mexico’s Personnel Office, “New Mexico’s average pay for 115 of 151 (government) job classifications trailed the average pay of the nearby states. Some workers’ average pay trailed the average pay in neighboring states by more than 20 percent including plumbers, biologists, engine mechanics, and chemists.”
The Rio Grande Foundation, on the other hand, analyzed data from the federal Bureau of Labor Statistics and Department of Labor to determine the earnings and compensation differences among employees of similar characteristics, skill sets, and occupations within the public and private sectors.
Using a mathematical tool called regression analysis to isolate relevant factors relating to employee pay including education levels, time of services, and more, the Foundation produced a careful analysis of data on both total compensation and benefits. The study finds that with benefits included, public workers in New Mexico make over 8 percent more in total compensation than a similar worker in the private sector.
Said Rio Grande Foundation president Paul Gessing of the differing approaches to government employee pay, “Gov. Martinez would be entirely justified in vetoing these pay hikes which went far beyond her original budget proposal and which unnecessarily increase the compensation disparity between government and private sector workers in New Mexico.”
The following was sent to me by Frank DuBois through Western Heritage Alliance. While I share their skepticism of online petitions, proponents of the land grab are using them, so opponents of the Monument designation should do the same.
The controversy around a National Monument in Dona Ana County has moved from local to national input. Secretary of the Interior Sally Jewell came to Las Cruces a few weeks ago for a listening session on the 500,000 acre Organ Mts-Desert Peaks National Monument. The environmental supporters had ample time to get notices out to rally support for the large national monument. Supporters of a smaller national monument for just the Organ Mountains had only 2 days to notify the local citizens of the meeting. The Sun News did not report about the meeting until the day of the meeting. Buses were used to bring supporters from Santa Fe, Albuquerque, Silver City and El Paso. Consequently, the room was packed to over capacity with monument supporters and the Secretary may have left with a false impression that the majority of the local people were in favor of a large national monument.
I have been skeptical of on line petitions until I received two from Senator Tom Udall, one asking for my signature on his petition in support of his bill S 1805 and the other on climate change. He will be using an online petition to generate support for his bill and or recommending to Secretary Jewell and President Obama he sign a Presidential Proclamation designating one fourth of Dona Ana County as a National Monument.
I have developed an online petition for those opposed to a large national monument to make it known to the President, Secretary Jewell and as well as Senators Udall and Heinrich that there is not a consensus in favor of the 500,000 acre national monument.
It is important that you sign the petition and pass the link on to your contacts for their signature. Together, we can stop this major land grab.
Jerry G. Schickedanz, Chairman
Thanks to the show Breaking Bad, many Americans now realize that they don’t need passports to visit New Mexico. We surely appreciate the publicity. But New Mexicans have reason to be even more grateful to another industry.
The New Mexico Tax Research Institute (NMTRI) recently released a study entitled Fiscal Impacts of Oil and Natural Gas Production in New Mexico. It’s impressively researched, including detailed county-level analyses. The results show that absent the tremendous financial impact of the oil and gas industries, New Mexico would be a far different, poorer state.
NMTRI found that 31.5% of the state’s General Fund revenues—the primary source of funding for state public schools and higher education—come from taxes paid by the oil and natural gas industries. The General Fund also pays for state public welfare programs, environmental protection, tourism advertising and support, road construction and maintenance, and many other functions of state government.
Oil and gas tax revenues are more than 40% greater than all personal income taxes collected by the state and are second only to the gross receipts tax in total contribution to the state’s coffers. Simply put, the oil and natural gas industries are vitally important to New Mexico’s economy and thus to the state’s capacity for public services. Policies regarding these industries therefore can have tremendous impacts.
For example, last April Mora County commissioners passed an ordinance preemptively banning all oil and gas drilling there. This is not to dismiss legitimate environmental concerns, but vigilance is not the same thing as paranoia. A blanket ban is particularly dubious considering that Mora County is among the most impoverished counties in New Mexico: 23.8% of its residents live in poverty according to the USDA’s Economic Research Service.
Fortunately, in counties where drilling has been going on for decades, in both the Permian Basin (Southeast New Mexico) and San Juan Basin (Northwest New Mexico), support for the oil and gas industries is very strong. After all, these people understand the considerable economic benefits and tradeoffs of living among the oil and gas rigs better than anyone else.
Money for government services has to come from somewhere, and much of it comes from oil and gas taxes. Tax policy is not very interesting to most people, but public services are and the connection between the two couldn’t be closer.
With just a few more drilling bans we could see some ugly results. Imagine your local public school with 31.5% less funding. It’s a frightening picture.
Given the considerable value of the oil and gas industries, it’s worth wondering how we can reap more benefits from their presence. Our neighboring states also have plentiful oil and gas reserves, so raising their taxes is not a wise move. We certainly want to keep them here. Fortunately, there is another, better way.
The federal government owns a staggering 41.8% of New Mexico’s land. If the state government were to obtain the lands that are not national parks, military installations, or wildlife areas and manage it at the state level the pool of jobs and resources generated by oil and gas could expand dramatically.
More and better public services without having to raise taxes is a rare win-win for New Mexico taxpayers. That is why the idea has gained bipartisan support in Santa Fe. Washington’s mismanagement of this land and its royalty payments has long been in need of remedy. The federal government has little motivation to do better.
Increasing state control of federal lands may not be realistic in today’s political climate, but what is even more crucial is preventing the federal government from further movement of federal lands into categories that prohibit oil and gas development. National parks and monuments are natural treasures; such designations should not be used to make ever more resources off limits to development.
New Mexicans have been relying on the oil and natural gas industries for years to fund public services. Policies that restrict these industries could be devastating to education, public welfare programs, and many other government services that we rely on. Policies that fail to account for the future productive potential of these industries shortchange New Mexico residents.
McElroy is a Policy Analyst 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
New Mexico’s gross receipts tax (GRT) is a noose around the neck of our state’s economy. This was the basic point of a recent column written by Rep. Larry Larrañaga (R) and Sen. George Muñoz (D). The column discussed a bill that died in the 2014 legislative session that would have eliminated the gross receipts tax from the sale of goods and services to the United States Department of Defense related to directed energy or satellites. In Albuquerque, the tax is charged at 7 percent. The rate varies statewide.
The impetus behind the bill is that New Mexico is pretty much unique in charging tax on business inputs (a few other states charge similar taxes at far lower rates). It is also unique in charging taxes on federal contractors and services provided to the federal government. This is because the GRT is charged as a percentage of total receipts, not a percent of sales.
The GRT is a jobs-killer because it increases costs for business by 7 percent or more above competing states, most of which do not have taxes on business inputs and none as high as New Mexico’s in terms of the rate. That is a huge margin for someone who plans to provide business services on a national basis and can locate their business anywhere. No one wants to pay an additional 7 percent on top of what they’re already paying to Washington and Santa Fe and, quite frankly, a business that must charge extra is not going to be as competitive.
Larrañaga and Muñoz are attempted to target the GRT for one group of contractors dealing with the Labs. It would reduce revenues to the State and Bernalillo county by anywhere from $2 to $10 million annually. The problem, of course, is that anytime you carve out one industry for special favors, you push that burden onto others. That’s why RGF opposed reducing electricity prices for a few favored businesses….ultimately the cost must be picked up elsewhere. Already, entrepreneurs and new businesses must pay 7 percent or more for attorneys, technology services, accountants, and a wide variety of other non-politically-favored services if they are provided by a New Mexico business. Alternatively, if you are looking to set up one of these businesses, you are strongly incentivized NOT to locate your business in New Mexico lest you have to add that tax to your prices.
New Mexico’s gross receipts tax either needs to be dramatically-reformed with the rates lowered and other taxes on productivity like the state income tax eliminated, or, the GRT must be eliminated entirely and the budget gap (totaling millions of dollars) made up through a combination of new revenues (including economic growth) and spending restraint. Read the Rio Grande Foundation’s detailed analysis of the gross receipts tax and its myriad problems here.
As an adherent to the view held by Mark Twain that “No man’s life, liberty, or property are safe while the legislature is in session,” I am breathing a sigh of relief today with the closing of the 2014 Legislative Session.
The really bad things that could have happened: increased tapping of the permanent fund for pre-K, minimum wage hikes, and return to an elected board of education, fell by the wayside. A budget was passed with bi-partisan support — raising spending by about 4.5 percent — so a special session is unlikely. Since this is the only true obligation of the Legislature in a 30-day session, we can more or less say “Mission Accomplished” in that regard. And the extreme liberals at ProgressNowNM are VERY upset because, despite Democrat majorities in both houses, they didn’t get their way during the session. So, mission doubly accomplished.
Unfortunately, this being the New Mexico Legislature, no serious economic reforms were undertaken, despite the drumbeat of bad economic news relating to our state. So, no “Right to Work,” no tax reform, no regulatory reform, and no serious education reform or school choice. Some common-sense bills that would have at least moved things in the right direction, but died include:
HB 113 which would have stripped worker’s comp benefits from people who injure themselves on the job while drunk or high.
HB 229 which would have toughened penalties for those who try to trade food stamps and EBT cards for cash.
SB 152 which would have provided some needed reforms to New Mexico’s outdated telecom laws.
HB 102, SB 256, SM 47, and SB1 would have either studied or funded studies of efforts to restore some federally-owned lands within New Mexico to the State (see ProgressNow’s crowing over killing one of these supposedly ALEC bills despite the fact that a very similar bill was sponsored by Majority Leader Sanchez, hardly a friend of ALEC and the concept has also been endorsed by Land Commissioner Ray Powell).
One ray of hope involved the Lottery Scholarship fund. One bi-partisan bill, HB 254, provided a reasonable compromise that included some aspects of the Rio Grande Foundation’s reform ideas.
Obviously a mixed bag 2014 session as is usually the case. Unfortunately, the Democrat-controlled Legislature remains the single greatest stumbling block to economic and educational advances in our State.
Every once in awhile, Congressional Republicans try to cut funding for Public Broadcast Service (PBS) and National Public Radio (NPR). While I believe that such efforts are justified, to date, supporters of these government-sponsored broadcast networks have managed to keep federal funds flowing. The total, $445 million annually, is small within the scope of the federal budget, but it’s hard to argue that the government should own media outlets or that popular shows like Downton Abbey or Sesame Street wouldn’t survive without federal funding.
So, why am I bringing this up now? Because I received an email detailing “An Evening with Amy Goodman Host and Executive Producer of Democracy Now.” The email goes on to note that “Proceeds from an “Evening with Amy Goodman” to benefit KNME, KUNM, and KSFR.” These are Albuquerque’s PBS station, NPR station, and Santa Fe’s NPR station respectively.
It is one thing for a donor-funded think tank like the Rio Grande Foundation to host Rush Limbaugh or for New Mexico Voices for Children to host Ms. Goodman, but it is quite another thing for taxpayer-financed “public” stations like these to benefit financially from hosting an appearance by such a hard-line “progressive” (even socialist) ideologue.
The fact that taxpayer dollars are being commingled with funds raised by Amy Goodman should be enough to give even politically-moderate New Mexicans heartburn and make them wish that these television and radio stations eliminated government funds from their budgets.
A very timely report from the Congressional Budget Office (CBO) has found that “raising the federal minimum wage to $10.10 an hour by 2016 would cost the economy 500,000 jobs.” To anyone who knows basic economics, the loss of some jobs due to an artificial price hike would be abundantly obvious. After all, elected officials have used tax hikes to reduce demand for junk food and cigarettes, why would artificial increases in wage rates not reduce demand?
Also, according to the CBO report, “About 16.5 million Americans would earn more money if the minimum wage is increased. This would boost earnings for low-wage workers by $31 billion,” it projects. Sounds great, but as the CBO states, the additional earnings would not necessarily increase the earnings of low-income workers. In fact, “only 19 percent of this money would go to families that are below the poverty threshold,” according to CBO.
Interestingly enough, New Mexico’s House of Representatives will soon be voting on SJR 13 which will increase the minimum wage to approximately $8.30 an hour and index that rate to inflation. While we don’t know how many jobs it will cost New Mexico, is this really the appropriate time to be reducing job opportunities for our fellow New Mexicans?
Last night in a bi-partisan 8-2 vote, SJR 12 which would have amended New Mexico’s Constitution to raid the Permanent Fund in order to finance an expansion of pre-K programs, was defeated. While it could be resurrected, it appears that the plan is dead for another session. Despite data indicating that such costly programs are ineffective in improving education results, it is safe to say that the pre-K expansion was, perhaps along with a hike in the minimum wage, the centerpiece of the left-wing agenda this year in Santa Fe. And now it is likely dead on an 8-2 vote. Ouch.
There’s no doubt that the senators who voted “no” will face the wrath of the powerful and well-funded leftist interest groups who were positively salivating at the possibility of tapping into the permanent fund honeypot to expand the size of government and their control over our children. So, it’s worth noting that Senators Beffort, Burt, Campos, Cisneros, Munoz, Leville, Neville, and John Arthur Smith voted ‘Yes,’ to table SJR 12 (and are worthy of praise and support for their courageous votes).
While the New Mexico pre-K vote is unlikely to generate the same national headlines, another rejection of leftist ideology: the recent vote by workers at a Volkswagen plant in Tennessee to reject unionizing with the United Autoworkers, has. The impact of this rejection is likely to be particularly important given management support for the unionization effort. Union supporters including President Obama have decried efforts by Republican politicians and conservative leaders in opposition to the unionization push, but the reality is that if workers felt they would have benefited from a union, they could have had one. Instead, the unions were rejected in a move that will only quicken the decline of private sector unions in the United States.
Unfortunately, government employee unions which even FDR opposed are the real problem, but unions of all stripes have tended to support the same left-wing policies and politicians.
New Mexico is a funny place sometimes. On one hand, our elected policymakers are more than happy to throw 25 cents on the dollar (if the show were to start filming now, that would be 30 cents on the dollar) through our generous film incentive program at a fictional television show, Breaking Bad, which uses Albuquerque as the setting for a gripping tale of a meth-dealing high school teacher. Everyone — the media, the business community, and the population at large — LOVES the show.
And then there is the reality show COPS which portrays real police dealing with real criminals. Former Mayor Marty Chavez famously kicked the show out of town back in 2004 citing the show’s negative portrayal of the community. The show has been given the go-head from Sheriff Dan Houston to come back to town, but this has two County Commissioners outraged.
I have no idea if COPS will be asking for film subsidies. If that is the case, I’d certainly oppose their presence, but how can people be so positive about a show that portrays Albuquerque as Breaking Bad did while trying to keep COPS out? Maybe these folks — O’Malley and Stebbins — need to spend more time working to clean up problems at the County Jail?
UPDATE: According to the New Mexico Film Office, COPS would likely be eligible for New Mexico’s 25% film subsidy rate.
Income inequality is a popular discussion topic these days. President Obama made it a central talking point in his recent State of the Union address and policy initiatives – most notably minimum wage hikes – have been proposed as means of reducing such inequality. Unfortunately, while inequality has unquestionably grown in recent years, there are few proven solutions and a lot of heated rhetoric.
It is worth noting that growing inequality is not unique to the United States. According to The Economist, inequality around the world has been growing since the mid-1980s in all areas except impoverished sub-Saharan Africa and the former Soviet Union. In other words, to an extent, inequality is a sign of economic development and strength. There is truth to Franklin Roosevelt’s observation that “Capitalism is unequally divided riches while socialism is equally divided poverty.”
In other words, people are not equal. Their skills and work ethics differ greatly. In a free society, we will all be more prosperous overall, but some will be much more prosperous than others.
There are a number of reasons why inequality has grown in recent years. Highly skilled people are in great demand, can command higher pay, and due to improved technology, global economic development, and freer trade, can sell their work on a global basis. Think of the ways in which globalization has multiplied the earning ability of athletes like Lebron James and actors such as Tom Cruise who are international superstars. In decades past, the limited size of the markets available to them limited their exposure and earning power.
While the high-skilled and unique have done very well, low-skilled laborers, especially in manufacturing, are increasingly competing against workers around the world, immigrants, and machines. There is no way around this reality. The solution is to spur educational innovation, preferably in the form of school choice, to move more workers into the high-skilled, in demand group.
Another cause of increasing inequality is money printing on the part of the Federal Reserve. A former top official at the Federal Reserve, Andrew Huszar called the Fed’s recent money printing “the greatest backdoor Wall Street bailout of all time.” Printing money helps big businesses, banks, and investors at the expense of savers, workers, and everyone else. It is time to reign in our nation’s monetary policy.
Speaking of bailouts and subsidies, it is worth considering the myriad ways in which government policies transfer wealth from the poor and middle classes to the very wealthy. New Mexico’s spaceport is one such example as are subsidies that were given to HP, Eclipse, and Schott Solar over the years.
In Washington, farm and housing subsidies skew to the rich as does flood insurance. And, of course, entitlements like Social Security and Medicare hit all workers with regressive taxes for the benefit of Warren Buffett and other wealthy seniors. Both systems are in dire need of reform that will both spur economic growth and allow poor and middle income workers to build their nest eggs and sock away money for future health expenses.
Unfortunately, the left’s solutions for inequality generally involve massively expanding the size of government. Raising the minimum wage is the most notable solution that has been proposed at both the state and federal levels. Unfortunately, there is no evidence that raising the minimum wage positively impacts inequality. In fact, with the unemployment rate for black teenagers at 35.5 percent and the rate for all teenagers at 20.2 percent, raising the minimum wage will have the long-term effect of pushing more working class youth out of the work force in favor of higher-skilled workers or machines.
Undoubtedly, inequality is a challenging problem. The good news is that improving the economy for all Americans doesn’t require us to loot people like Bill Gates, Lebron James, and other wealthy people who have made the world a better place through their skills and products.
Rather, policymakers both in Santa Fe and in Washington need to focus on growing the overall size of the economic pie, not finding better ways to redistribute wealth in an economy that is no longer growing.
Paul Gessing is the President of 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
Check out this interesting posting from Andrew Coulson of the Cato Institute who is actually relating details of a debate on pre-K between Upjohn Institute economist and government Pre-K advocate Tim Bartik and Russ Whitehurst, an early education expert at the Brookings Institution who is critical of the case for universal government Pre-K.
As explained by Coulson, “Bartik is right that there are two early education programs in particular, High Scope/Perry and Abecedarian, that showed substantial long term benefits. But these were tiny programs operated by the people who had designed them and serving only a few dozen or a few score children.”
But, continues Coulson, “Whitehurst and others focus on the results of large scale federal and state programs, because these are relevant to the present policy debate.” And, concludes Coulson:
To sum up, there is at best no favorable consensus among non-experimental studies of large scale government Pre-K programs, but there is a consensus among the more reliable experimental studies: program effects fade out by the elementary school years, sometimes by the end of kindergarten. That is the evidence that matters when discussing proposals for expanding government Pre-K.
One might expect that this information would be relevant to policymakers as they discuss SJR 12 which would tap New Mexico’s permanent fund to pay for a new pre-K program. With less than a week to go, the Amendment was last in Senate Finance. It still has a long way to go before passage, but funny things can happen in the New Mexico Legislature.