This week is going to go down as one of the most important in Indiana history. While hosting the first Super Bowl ever to be held in the state is a big deal, the really big deal is that the state’s Gov. Mitch Daniels has signed Right to Work Legislation. Simply put, the legislation enacted in Indiana will barunion contracts from requiring non-union members to pay fees for representation. Kudos to Daniels who I recently criticized.

Simply put, Right to Work is one of the easiest ways for states to become more competitive economically. New Mexico is, of course, not a Right to Work state. Following are a few specific ways in which this legislation improves a state’s economic outlook.

Right to Work States Benefit From Faster Growth, Higher Real Purchasing Power – 2011 Update

Percentage Growth in Non-Farm Private-Sector Employees (2000-2010)

Right to Work States . . . . . . . . . . . . . . . +0.3%
Forced-Unionism States. . . . . . . . . . . . . . -5.5%
National Average . . . . . . . . . . . . . . . . . .  -3.3%
Source: Department of Labor, Bureau of Labor Statistics (BLS)

Percentage Real Growth in Private-Sector Employee Compensation (2000-2010)

Right to Work States . . . . . . . . . . . . . . . 11.3%
Forced-Unionism States. . . . . . . . . . . . .  . 0.7%
(2000-2010) National Average . . . . .  . . . . 4.3%
BEA; BLS

Cost of Living-Adjusted Compensation Per Private-Sector Employee (2010)

Right to Work States . . . . . . . . . . . . . $56,575
Forced-Unionism States . . . . . . . . . . . $55,420
National Average . . . . . . . . . . . . . . . . $55,896
Missouri Economic Research and Information Center (MERIC);
BEA; Department of Commerce, Bureau of the Census (BOC)

Testimony on behalf of HB 130 which was introduced by Rep. Strickler, Tuesday, Jan. 31, at 1:30pm in room 309.

Current New Mexico Corporate income tax rates are:

4.8% > 0

6.4% > $500K

7.6% > $1Million

This legislation would lower that rate to 4.8% across the board by 2015. In FY 2010, the corporate income tax generated $125 million in revenue. By its nature, this tax is highly volatile on a year to year basis, thus making it an inconsistent revenue supporter, particularly at higher rates. Reducing rates would improve the consistency of those collections and could, if it helped attracted one or more major businesses, result in greater overall tax revenue.

According to the non-partisan Tax Foundation, New Mexico’s corporate income tax was the 34^th– worst corporate income tax in the nation in FY 2011. In FY 2012, that ranking had dropped to 38^th.

For states with corporate income taxes, the three most relevant measurements are top tax rate, the level of taxable income at which the top rate kicks in, and the number of brackets.

This legislation would make New Mexico’s corporate income structure more competitive by addressing all three of the major factors impacting corporate income taxation:

• by reducing the top rate by 37%;
• reducing the number of brackets from three to one.

Why is reducing the corporate income tax a good idea?

Newman (1982) found that differentials in state corporate income taxes were a major factor influencing the movement of industry to southern states. Two decades later, with global investment greatly expanded, Agostini and Tulayasathien (2001) determined that a state’s corporate tax rate is “the most relevant tax in the investment decisions of foreign investors.”

The need to reduce corporate tax burdens is not a partisan issue. President Obama, during his recent State of the Union speech, has made reforming corporate income taxes a top priority. He said in his speech that reforming the tax code will help bring “jobs back” to the U.S and that “companies that choose to stay in America get hit with one of the highest tax rates in the world. It makes no sense, and everyone knows it. So let’s change it.”

It is noteworthy that a state’s corporate tax is levied in addition to the federal corporate income tax rate, which varies from 15 percent on the first dollar of income to a top rate of 35 percent. This top rate is the second-highest corporate income tax rate among industrial nations. In many states, federal and state corporate tax rates combine to levy the highest corporate tax rates in the world.

This is a global economy and businesses look to locate and create jobs where they have the most favorable rules, regulations, and tax burdens. Even before Japan reduced its corporate income tax rate, New Mexico was one of 24 U.S. states have a combined corporate tax rate higher than top-ranked Japan.

On the other hand, according to the Federation of Tax Administrators, there are three states that levy neither a corporate income tax nor a gross receipts tax: Nevada, South Dakota and Wyoming. New Mexico’s corporate tax rate is the highest among states in the region — for example, Colorado’s rate is 4.63 percent, Arizona’s is 6.97 percent and Utah’s is 5 percent.

New Mexico’s corporate income tax as a share of total state/local business taxes is 6.6% According to the liberal Center for Budget & Policy Priorities, this is about the median.

According to the Tax Foundation’s 2007 report, “Personalizing the Income Tax”: One of the lowest-income households in America bear a large share of the corporate tax burden.

In total, the poorest 20 percent of households pay more in corporate income taxes each year than they pay in individual income taxes to the IRS each April. Households earning under $23,700 in 2004 paid $271 in corporate income taxes, compared to just $171 in individual income taxes.

As a share of their total tax burden, corporate taxes were 6.3 percent of low-income households’ tax bills compared to just 4 percent for individual income taxes. The only tax that hits low-income families harder than corporate taxes is the federal payroll tax, which is designed to pay for Social Security and Medicare.

“What this means is that cutting corporate tax rates is not about handing money to U.S. companies,” said Hodge. “It is about providing tax relief to American families, much of which will provide enormous benefits to the nation’s lowest-income wage earners.”

Cutting New Mexico’s income tax would be a move towards economic competitiveness. If the Legislature is serious about attracting job-creating businesses to New Mexico, reducing the corporate income tax would be a simple way to put our state especially relative to the myriad tax credits and incentives that are either on the books or under consideration.

I blogged my own thoughts about the “Occupy” attack on a peaceful group of legislators having a private dinner. Michael Swickard offered his own thoughts in a spot-on column as well. More coverage on the meeting disruption can be found over at New Mexico Watchdog here and here (including video).

“Protesters Scuffle with Lobbyists” reads the extremely misleading headline in the Albuquerque Journal. At least the New Mexican acknowledged that many of the attendees at ALEC’s recent dinner in Santa Fe were indeed lawmakers and thus deserving of more respect than reviled lobbyists.

But what if a group of right-wing goons (or heaven-forbid Tea Partiers) had forcibly disrupted a peaceful meeting of the ACLU or Friends of the Earth? Straight out of Germany in the 1930’s, right?

Of course, we already know that the “Occupy” movement is not keen on the first amendment. See here and here. So, what would a more descriptive headline have been? How about “Anti-free speech protesters forcibly disrupt peaceful, private meeting.”

Personally, I hope the “Occupy” folks continue their “brown-shirt”‘ tactics as it only further discredits their so-called movement.

I must admit that I did not watch Obama’s speech, nor did I watch the response from Indiana Gov. Mitch Daniels. I have heard enough of Obama’s empty rhetoric over the years and had better things to do. Nonetheless, Daniels’ response is worth a read. It represents Republicans at their very very best, at least in terms of rhetoric and it is hard for a fiscal conservative to disagree with much of what it contained. While Daniels is not running for President, these are the sentiments (not social policy, foreign policy, or immigration) that should form the basis of Republicans’ pitch to the American people.

That said, it is worth comparing Daniels’ real track record to his rhetoric. Daniels headed up the Office of Management and Budget under George W. Bush. While not in Obama’s league, Bush was a very big spender as President. Yes, I realize that Congress is in charge of budgets, but Bush didn’t exactly wield an effective veto pen…Also, while Daniels was in office, Bush was promoting his massive Prescription Drug Entitlement and got No Child Left Behind (a massive expansion of the federal role in education) passed. While I can’t blame Daniels entirely for Bush’s policies (and he did resign after just a few years of service), I have no record of Daniels protesting Bush’s big-spending expansions of government, but if a reader has one (or more), please post them in the comments section.

I’m not trying to dismiss Daniels’ track record of public service. He is doing a good job as Gov. of Indiana and I wish he was running for President. I do wish that more Republicans adhered to their rhetoric when it comes to government spending and actually downsizing Washington.

As the US Postal Service founders and Congress attempts to reform the system (without breaking up the monopoly), it is worth pointing out that postal operations in most wealthy countries actually MAKE money. The USPS on the other hand, has lost over $25 billion since fiscal year 2006, with deficits of $8.5 billion in 2010 and $5.1 billion in 2011. It forecasts an astonishing $14 billion loss in 2012.

There is no reason, despite competition from the Internet, that delivering packages and the mail could not make money in the United States as well. It is time to abandon socialism in the mail and just privatize it.

Robert Samuelson absolutely nails it when it comes to President Obama’s terrible decision not to approve the Keystone XL Pipeline. Our friend Marita Noon adds her arguments to the mix showing that Obama is all show, no substance.

Interestingly enough, given the trends in the Heritage Foundation’s Index of Economic Freedom which measures levels of economic freedom around the world, Canada is 6th while the supposedly “free market” US of A has fallen to 10th. Canada is going to start thinking about the US and our corrupt and incompetent government as we have thought about Mexico and their governments.

The “Occupy” movement is now promoting a pledge to get corporate money out of politics. Of course, what they fail to realize is that money (like life) will always find a way into politics because governments have the power to create or destroy businesses with the stroke of a pen. But that’s a different story.

What is more interesting is that Democrats both in New Mexico and nationally (who often claim to share the goals of the “Occupy” movement) are more dependent on corporate contributions than are Republicans. Check this story and this one from New Mexico Watchdog. And there’s Eric Griego who proudly signed the pledge, but is still planning to take corporate contributions for his campaign for the U.S. House.

Lastly, there is President Obama, supposedly the defender of the poor and downtrodden. According to Tim Carney, author of the book “Obamanomics,” the president received far more from America’s biggest corporations. I have gleaned a few details from the book and posted them below, but the whole book is worth the read (and Carney may be coming to New Mexico later this year).

Goldman Sachs was the source of more campaign contributions in 2008 than any other company. Obama received $997,095 to McCain’s $230,095.

Obama received $19.4 million from the health care industry in 2008. McCain received $7.4 million.

HMO’s gave Obama three times more money than McCain.

Drug companies gave Obama $3.57 for each dollar McCain raised from the industry.

The biggest oil company in America, Exxon gave Obama $117,946 to McCain’s $73,326.

Of course, Obama portrays his policies as being “on behalf of the little guy,” when in reality his policies equate to “crony capitalism” or “corporatism.” This is not to say that Republicans are never guilty of the same thing, but to make it clear that money will ALWAYS play a role in politics if government can use threats of force to take from one group and give to another.

I recently penned an article for several papers around the state, including the Las Cruces Sun-News, explaining some of the issues surrounding government employee pensions and why New Mexico policymakers should embrace the bi-partisan (or even Democrat-driven) pension reforms enacted in Rhode Island.

I was especially pleased to see that Senate Finance Committee Chair John Arthur Smith had criticized Gov. Martinez for not being aggressive enough in tackling the pension issue in a recent KOB-TV story.

I recently appeared on KSVP radio in Southeast New Mexico to discuss the important issues being discussed during the legislative session and Gov. Martinez’s State of the State address. Go to this link and click the first podcast.

I attempted to lend some sanity to the Alibi’s letters section. In the process, I tried to encourage Sen. Jerry Ortiz y Pino to look on the bright side when it comes to education reform (see my tax credits posting).

As Rob Nikolewski over at Capitol Report points out in a story, the Rail Runner is going to suck up ever larger quantities of taxpayer cash in the years ahead, including two $235 million balloon payments which come due in a bit more than a decade.

We’ve previously outlined the myriad reasons to cut our losses by shutting down the Rail Runner, but these $235 million balloon payments must be paid no matter what.

Moving forward, the Legislature must demand that any major infrastructure project be financed with regular, even payments over the years, not with balloon payments that force future legislators and governors to deal with previous decisions.

Paul Gessing, president of the Rio Grande Foundation, will be discussing the legislative session and what can be done right now to help turn both New Mexico’s economy and its education system around. The following show which lasts 30 minutes and airs on KCHF, a Christian station based in Santa Fe, channel 11, will air at the following times:

Friday, Jan 19 at 10am
Friday Jan 27 at 10:30 a.m.
Sat. Jan 28 at 10 pm
Mon Jan 30 at 6pm

Also, in the Las Cruces area, Gessing will appear on KRWG Channel 22 (the local PBS station) to discuss education issues in NM for 30 minutes on

Thursday, Jan. 26 at 7pm
Saturday, Jan 28 at 5pm
Sunday, Jan 29 at 11am

Tune in or set your DVR’s!

The number one legislative priority of the Rio Grande Foundation this session is to get education tax credits for school choice. A letter on this has been posted below. Liberal Sen. Jerry Ortiz y Pino has sponsored one of the bills. Feel free to use parts of this letter to contact your own legislators.

January 18, 2012

To Whom It May Concern:

The Rio Grande Foundation is New Mexico’s only free market think tank working on public policy issues of interest to residents of our state. Our primary research areas include tax, budget, and education reform. The issue of education reform transcends the others because education forms such a large portion of the state’s budget – nearly half of the general fund – and impacts so many areas of the state economy.

The potential for positive impact of the Equal Opportunity Scholarship Act and the Special Needs Student Scholarship Act would be immeasurable.

Here’s why passing these bills is important for New Mexico’s economic vitality and our children’s future:

• More than one-third of our students drop out before graduating from high school.

• This must be turned around in order to attract new businesses and business growth in our state and to give our children the opportunities they need to succeed in school.

• This legislation will help provide scholarships that will enable lower-income and special-needs students to attend schools that will better meet their needs. They will be much more likely to stay in school and to develop a solid educational foundation.

According to recent polling data more than 70 percent of N.M. voters support tax-credit scholarships for children from low-income families. For special-needs students, the support for tax-credit scholarships rose to an astonishing 78 percent in the poll.

While money is still tight, the good news is that these tax credit bills will have a slight, positive impact on New Mexico’s budget. Rather than sucking resources out of the budget, these bills would give greater educational choice to parents and students, all while slightly improving the budget.

Education tax credits are not a partisan issue. Legislators of both parties have supported education tax credits in states that have adopted them including Florida, Iowa, Pennsylvania, Arizona, and Rhode Island.

New Mexico needs serious education reform. That is why the Rio Grande Foundation supports the Equal Opportunity Scholarship Act and the Special Needs Student Scholarship Act.

Sincerely,

Paul J. Gessing
President

There is an excellent, short article here from the Manhattan Institute’s City Journal. It explains that, despite an economic downturn that has significantly harmed the convention center business — on top of a longer-term, more gradual decline in the business — cities nationwide continue to build new convention centers.

Rather than embarking on this misguided and costly path, Mayor Berry should be applauded for focusing attention on everyday governance issues and game-changing, but basic ideas like the Paseo/I-25 interchange.

I was up in Santa Fe much of the day for the first day of the legislative session. And, while the Speaker’s cancer announcement was a bombshell, I was intrigued by the shenanigans of the so-called “Occupy” movement. At the start of Gov. Martinez’s “State of the State” address, they caused a disruption and yelled, interrupting her.

This plain lack of disrespect is one of the biggest differences between “Occupy” and the “Tea Party.” The former simply doesn’t respect the forum and the right of those who they disagree with to be heard.

To be honest (as it has been all along), it is unclear what their specific grievances with the Gov. are. Are they upset about the drivers’ license issue? I’m not sure. I walked past their rally several times throughout the day and heard a bunch of statements about the Federal government and issues they have with it, but heard very little in the way of specific critiques against Martinez. Of course, it is worth noting that the Gov. has an approval rating of 65%, so far from being the 99%, they are, at least in this instance, no more than the 35%.

Recently, Public Service Company of New Mexico filed an application to charge higher electricity rates to its customers in order to recoup money spent on so-called “renewable” energy projects.

Not surprisingly, the very same environmental groups who convinced policymakers to impose the “Renewable Portfolio Standard” have challenged the rate increase on the grounds that the application “gives the false impression renewable energy is responsible for increased rates.” Of course, as the Rio Grande Foundation has pointed out, the RPS will cost New Mexico utility rate-payers $2.3 billion over the next 10 years if it is not altered.

The chart below illustrates how the cost differentials stack up:

The Rio Grande Foundation hosted a forum on K-12 education reform in Las Cruces on Jan. 12. Forum participants included Paul Gessing of the Rio Grande Foundation, Sen. Steve Fischmann (D-Las Cruces), Tracey Bryan of the Bridge of Southern New Mexico, and Robert Carreon of Teach for America.

Watch 1-12-12 Education Forum Las Cruces.wmv in Activism & Non-Profit  |  View More Free Videos Online at Veoh.com

Apparently not, if we are to take left-wing Democratic Rep. Miguel Garcia at his words and again here. I’m not sure if this is a desperate cry for help or attention or if he really believes half of what he says, but it looks like “the Mexican on the 4th Floor” was just a prelude for the really crazy stuff.

No wonder New Mexico has survived rather than thrived. It would seem that too many of our representatives have no grasp on reality.

We all know that health care is a major issue in America. I met a very interesting man named Stan Brock recently who works to bring medical care to those who cannot access it. There is a great “60 Minutes” story below:

Unfortunately, one detail that “60 Minutes” left out is that Remote Air Medical won’t come to New Mexico and most states besides Tennessee because doctors from other states are not allowed to volunteer their medical services in states in which they are not licensed. Yet another way that licensing fails to serve those who it is theoretically supposed to protect.

Anyway, if any legislators out there are interested in sponsoring legislation to allow volunteer doctors from out of state to serve in New Mexico, we’d be happy to help.

Thomas Sowell has an excellent column discussing the different ways in which time and government policies have impacted the Kodak company (which recently filed for bankruptcy) and the Post Office.

Of course, government never innovates and always responds first and foremost to political rather than economic and market forces. So, all of the problems faced by the Post Office are only multiplied when one considers that there are no viable, large-scale competitors to our government schools (yes, there are private schools, but people who send their children there must pay twice) and the health care system once ObamaCare is fully implemented (per Obama’s own rhetoric).

So, while we are using smaller, higher-resolution digital cameras that forced Kodak out of business (due to a failure to innovate), the government continues to keep our children in failing and outdated schools (without even the hope of real competitors like FedEx and UPS) and stands poised to completely take over our health care system.

There are plenty of good government workers out there, but how secure is your job when the firing of three City workers is front-page (above-the-fold) news? Certainly, fraud and all of the abuses of power that were apparently taking place are big issues that give cause to the firings, but does anyone in government ever get fired for mere incompetence?

Of course, we expect that the government workers union will find some reason to challenge these firings and will make the process far more costly for taxpayers (and lengthy) than it should be, but we applaud Mayor Berry and his staff for taking firm action when needed. The City of Albuquerque is slowly become a more efficiently-run, less corrupt place due to his efforts.

Gov. Martinez has discussed ways in which she’d like to reduce New Mexicans’ tax burdens by tackling aspects of the gross receipts tax. This is a good thing.

I discussed some of the preliminary reform ideas with the Santa Fe Reporter which portrayed my views towards the reform in a largely negative light. However, that is not the case. We at the RGF are very enthusiastic about the Governor’s proposal to eliminate the GRT on small businesses. Taxing these tiny, single-person, and often part-time businesses creates more hassle than it is worth in terms of revenue.

However, there is a legitimate discussion to be had over whether the GRT is worth saving or whether the best way to eliminate its worst aspects is to create carve-outs that attempt to eliminate “pyramiding.” This is where the negative nature of my comments comes through in the article. The GRT is meant to be low and broad. It has become a tax that is charged at a high rate with many carve-outs included. Martinez’s well-intended effort to eliminate pyramiding COULD result in higher rates down the line, especially if spending rises.

New Mexico’s Public Education Department has released its first-ever batch of A-F grades for public schools around New Mexico. The data relies on several measures to better understand and give parents and students the information they need to see if schools in their community are doing the job and whether student performance is improving or declining. This tool idea was brought to New Mexico by the Rio Grande Foundation as part of the “Florida Model” for education reform.

If that isn’t enough for you (would you rely on just one data source before buying a new car?), check out the recent school analysis tool that was created by the New Mexico Coalition for Charter Schools.