In public policy, if you stick around long enough issues that you thought were “dead and buried” invariably come back. One such issue is air traffic control which President Donald Trump intends to reform by, among other things, separating government’s regulatory/safety function from operations.

Rio Grande Foundation president Paul Gessing wrote about the issue extensively in his role with the National Taxpayers Union, a government reform organization based in the DC area.

Gessing’s involvement in the issue goes back nearly two decades with a policy brief  and items published in the Wall Street Journal. With Canada and the UK already having enacted reforms to free air traffic control from the bounds of government, it is indeed time to reform America’s air traffic control system.

New Mexico’s Higher Education Department just announced that New Mexico’s Lottery Scholarship will cover an average of “only” 60 percent of qualifying students’ tuition at New Mexico institutions.

That’s down from 90 percent coverage this year, thanks to long-term declines in lottery revenues, rising tuition, and the fact that liquor taxes will no longer be diverted to prop up the scholarship program.

These problems were easy to foresee.

A few years ago, the Rio Grande Foundation outlined problems with the program as currently formulated and detailed some potential changes to the scholarship a few years ago in a paper, “A Market-Based Approach to New Mexico’s Lottery Scholarship Program.”

Here are a few initial problems with the program itself:

1. By traditionally covering 100 percent of costs, the scholarship created an entitlement mentality among students who failed to value the benefit they are receiving.
2. Students who would otherwise spend their own or their family’s money or obtain scholarships no longer did.
3. The scholarship subsidized New Mexico’s institutes of higher learning, as they priced tuition to maximize scholarship funding.
4. There will always be more demand for “free” college tuition than there are people willing to make long-shot bets on lotteries. This is the very definition of a “regressive” (albeit voluntary) tax. People playing the lottery are generally of low income levels while those benefiting tend to be of higher than average incomes.

Based on the points outlined above, given New Mexico’s ongoing budget woes, and more filling the Lottery Scholarship budget with money from elsewhere in the budget is unacceptable.

In fact, a scholarship that “only” covers 60 percent of tuition might be preferable in many ways to one covering 100 percent, as it reduces the entitlement mentality and creates incentives for students to look for additional financing for college.

Should there be higher standards or income limits on the scholarship program? Those are good questions, but it is hard to hold a physics major scraping by at demanding New Mexico Tech to the same GPA requirements as a student in a less-challenging field like political science, my chosen area of study.

And, while it is tempting to make the Lottery Scholarship yet another “progressive” government program geared to helping those of modest incomes, policymakers should demand results from both the Lottery Scholarship and higher education in general rather than punishing “the rich.”

For instance, how many scholarship recipients stay in New Mexico to work instead of leaving our state? Should we limit the scholarship to fund scholarships to just New Mexico schools? Or should the program give students a fixed amount to use at the school of their choice, whether it’s in or out of state?

It’s worth noting that New Mexico spends generously on higher education and that tuition here is lowest in the nation.

In March, Student Loan Hero, an Austin, Texas-based student loan management company, used U.S. Department of Education data to calculate the average cost per credit hour for residents to attend public colleges and universities in each state.

The average rate at schools around New Mexico is by far the lowest, at $112.77. All of this spending hasn’t done much for New Mexico’s economy with its highest-in-the-nation unemployment rate.

In New Hampshire, on the other hand, a credit hour costs $387. Yet, its economy is among the most vibrant in the nation.

If used correctly, the Lottery Scholarship could force New Mexico’s higher education system to excel and be more cost-effective.

Policymakers can and should reform the Lottery Scholarship to bring increased transparency and accountability to all of higher education.

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.

No one “makes” you batter an intimate partner.

But while domestic violence is more a function of culture than policy, government plays a proper role in the crime, especially in New Mexico, where the offense is committed at a rate above the national standard.

Unfortunately, according to a new report from the Legislative Finance Committee, New Mexico’s public sector can be doing a much better job serving both victims and offenders.

“Domestic Violence Programs for Victims and Batterers” found that the state’s response to the crime is “fragmented and uncoordinated.” One obstacle is the number of “entities involved in responding to domestic violence,” a list that includes law enforcement agencies at all levels, the New Mexico Children, Youth and Families Department, the Crime Victims Reparation Commission, welfare programs, the Judicial Education Center, and government schools. As the pictograph above shows, the bureaucracies are many, and streamlining is necessary.

Another disturbing revelation was the small number of “clients” who complete batterer intervention programs. Usually ordered to participate by a judge, offenders must complete 78 hours over the course of 52 weeks. But on average, only 20 hours “of any type of counseling” were received in fiscal year 2016. Worse still, the mandate for yearlong participation in a BIP “is unsupported by evidence.” LFC staffers found “no consensus on the optimal length a program should be to be effective.”

The “Domestic Violence Leadership Commission” offers an egregious example of dropping the ball. Formerly founded on an executive order, the 26-member body was “enacted into statute by the Legislature in 2010.” Yet “there is no evidence the Commission has met since that time.” Not impressive “leadership,” that.

Finally, keeping police and judiciary employees up-to-date on best practices in combating domestic violence doesn’t appear to be enough of a priority. The New Mexico Law Enforcement Academy requires “just one hour of refresher training” on the subject “for officers as part of the biennial in-service cycle.” There has been “no statewide domestic violence-specific training for judges and court personnel in New Mexico since 2006,” and the Judicial Education Center’s statute “makes no provision for requiring training” on the crime.

There is a limit to what government can do to address the carnage created by people who choose to abuse an intimate partner. But the LFC’s report shows that New Mexico’s bureaucrats and elected officials need to take the problem of domestic violence more seriously, and implement a number of necessary — and affordable — reforms.

Last month Errors of Enchantment inaugurated a new system to benchmark employment growth in New Mexico. The U.S. Bureau of Labor Statistics conducts a regular analysis of 12-month employment changes in the nation’s metropolitan statistical areas. Our new analysis looks at New Mexico’s four MSAs, compared with the 49 MSAs found in the state’s five neighbors: Arizona, Utah, Colorado, Oklahoma, and Texas.

As depicted in the chart above, in the second month of our research, the results still don’t look good. Average job growth from April 2016 to April 2017, for the non-New Mexico MSAs, was 1.4 percent. Las Cruces came closest to the regional pace, at 1.0 percent growth. But Albuquerque (0.5 percent) and Santa Fe (0.5 percent) lagged far behind, and Farmington dropped by 1.4 percent. (In the region, only Texarkana, at -1.6 percent, performed more dismally.)

The good news is that since bottoming out in September 2010, employment in New Mexico has been on a generally upward path (See chart below.) But the state has yet to regain its pre-Great Recession peak, and as the BLS data show, neighbor MSAs are doing much, much better. The Land of Enchantment remains desperate for proven, powerful policy tools to boost economic development. How much longer do we have to wait?

We didn’t need more evidence about the value of limiting the welfare state to the truly needy, but here it is: In Alabama, between January 1, 2016 and May 1, 2017, the number of “able-bodied adults without dependents utilizing the Supplemental Nutrition Assistance Program, known as SNAP or food stamps” dropped by 85 percent.

The Heart of Dixie isn’t alone. In Maine, the cut in SNAP rolls for the able-bodied was 90 percent. Kansas and Indiana have seen big drops, too.

As the Heritage Foundation’s Robert Rector noted last year, when the Obama administration waived the rule that able-bodied adults without dependents (ABAWDs) were limited to “three months of benefits in a 36-month period unless they were employed or participating in a work program at least part time,” enrollment in SNAP program soared. Between 2007 and 2013, the caseload expanded from under 2 million to 4.9 million.

In late 2014, Maine’s chief executive decided to re-impose the productive-activity mandate for ABAWDs getting food stamps. Cruel? Mean-spirited? Perhaps not. Here’s the state’s commissioner of human services:

When we began requiring able-bodied adults without dependents … to work 20 hours per week, volunteer an hour per day, or attend vocational training in order to maintain food stamp benefits, only about one in five complied. Even when we have reached out to ABAWDs with job and volunteer opportunities, they have opted simply to go without benefits and have declined to participate in the training or volunteer opportunities. It is truly a sad situation but it underscores the point that we cannot enable willful inactivity and it is imperative that these programs are designed to help people who are making a genuine attempt to transition from poverty to prosperity. They cannot be a way of life.

We know from the data and from our law enforcement partners that a significant portion of drug related arrests and crimes include individuals with EBT cards and SNAP benefits. Unfortunately, too many of these folks are ABAWDs that aren’t meeting the work requirement of the program. These able-bodied adults need to get a job, not get more food stamps. This experience tells us that government at all levels should consider work and volunteer requirements for all welfare programs in order to end the perception of welfare as a lifetime handout.

And as Rector pointed out, if SNAP were such a critical support for ABAWDs, who “barely have enough money to feed themselves,” why does the cohort smoke so many cigarettes? Using data from the National Health and Nutrition Examination Survey, the scholar found that “over 50 percent of ABAWDs” smoke, “consuming on average 19 packs of cigarettes” a month, at a cost of “around $111 per month.” (See chart above.)

In New Mexico, though, the story’s familiarly depressing. Late last year, the Martinez administration, citing the three-decades-long litigation engineered by the state’s welfare industry to protect SNAP, “asked the U.S. government to continue exempting able-bodied adults receiving food aid from having to get a job or volunteer at a nonprofit agency.”

Meanwhile, the boss of the New Mexico Children, Youth, and Families Department is concerned that “two-thirds of those who are eligible have yet to enroll” their kids in taxpayer-subsidized childcare assistance.

Is it any wonder that “lack of applicants” is a serious problem for New Mexico employers looking to hire?

Since January 2015, the Foundation has tracked announcements of expansions, relocations, and greenfield investments published on Area Development‘s website. Founded in 1965, the publication “is considered the leading executive magazine covering corporate site selection and relocation. … Area Development is published quarterly and has 60,000 mailed copies.” In an explanation to the Foundation, its editor wrote that items for Area Development‘s announcements listing are “culled from RSS feeds and press releases that are emailed to us from various sources, including economic development organizations, PR agencies, businesses, etc. We usually highlight ones that represent large numbers of new jobs and/or investment in industrial projects.”

In May, of 13,507 projected jobs, 11,096 — 82.1 percent — were slated for right-to-work (RTW) states:

Once again, Missouri deserves special attention. It accounted for a whopping 33.2 percent of all jobs to be created in non-RTW states. But the Show-Me State passed a RTW law earlier this year, with an effective date of August 28th. When September’s data are compiled, and Missouri begins to be counted as RTW, the labor-freedom advantage in employment growth is likely to spike even higher.

As for the sub-metrics the Foundation scrutinizes:

* Seventeen domestic companies based in non-RTW states announced investments in RTW states. Just two announcements went the other way.

* RTW prevailed in foreign direct investment, too. Seventeen projects are headed to RTW states, with four to occur in non-RTW states.

Marquee RTW investments included:

* Nokian Tyres picked Tennessee for a 400-employee factory

* James Hardie Building Products will create 205 jobs at a new plant for “fiber-cement building products” in Alabama

* Constant Aviation, “a full-service maintenance, repair, and overhaul operation with a nationwide network,” will hire 200 workers to operate a “state-of-the-art” facility in Arizona

Methodological specifics:

* All job estimates — “up to,” “as many as,” “about” — were taken at face value, for RTW and non-RTW states alike.

* If an announcement did not make an employment projection, efforts were made to obtain an estimate from newspaper articles and/or press releases from additional sources.

* If no job figure could be found anywhere, the project was not counted, whether it was a RTW or non-RTW state.

* Non-border-crossing relocations were not counted, border-crossing relocations were.

Although he’s head of one of the largest tax eating institutions in New Mexico, I’ve always had respect for interim president Chaouki Abdallah. That respect only grew after reading the lengthy profile in the Albuquerque Journal over the weekend.

For starters, Abdallah didn’t back down when various leftists attempted to shut down a talk by Milo Yiannopoulos. But this interview displayed an honesty about both New Mexico and higher education in general that is rare among people of his position. Specifically, he said, “Our higher ed spending is more than most other states; the trouble is we don’t spend it wisely and (we) spread it across so many entities. We do need a plan.” (RGF has made this point repeatedly)

This is anathema to those on the left for whom no amount of spending is adequate. We just saw in the recently-completed special session that legislative Democrats have no desire to cut spending in any systemic way. Even the head of the State’s flagship University “gets it.”

Even more enlightening is his statement “UNM has these spires of excellence, best in the world or top five, but like everything else around this state, the average is bad because you have to make sure everyone is taken care of.”
”
In other words, resources “paying off” various constituencies and/or distributing resources in ways that are ineffective and unnecessary for mere political reasons that ultimately degrade the quality of the product as a whole.

Abdallah clearly understands the way things work in New Mexico. Since he doesn’t want to stay on as UNM President, perhaps he has a future in politics?

Source: GRT rates schedules,  New Mexico Taxation and Revenue Department 

When local governments in the Land of Enchantment increase their gross receipts taxes, the hikes go into effect on January 1st or July 1st. So one month from today, a hefty number of New Mexico taxpayers will be paying more when purchasing goods and services. Albuquerque’s levy, boosted by Bernalillo County’s imposition of a three-sixteenths of 1 percent increase, will rise to 7.5 percent.

Sadly, GRT rates in the new century have gone in only one direction — up. The chart above lists how much New Mexico’s seven largest municipalities raised their GRT rates between January 1st, 2000 and January 1st, 2017. (Rio Rancho is bifurcated into its Bernalillo County and Sandoval County portions.) The biggest burden was imposed by Las Cruces, which increased its rate from 6.375 percent to 7.75 percent. But among the seven, The City of the Crosses will soon lose its status as the top hiker. Clovisites are scheduled to get hit with an eighth-of-a-percent increase July 1st, which means their rate will have increased by a whopping 31 percent since 2000.

Did local pols hike the GRT in your community — or are they planning to? Let us know about it.

Albuquerque City Councilor Isaac Benton’s proposal to create a 2 cents-per-gallon gas tax will be voted on by the full council on June 5. If enacted, the tax would be a net negative for the city of Albuquerque. Aside from adding to an already-high local tax burden and disproportionately affecting low-income families, Benton’s tax would not do much to improve the city’s roads and have negative effects on its economy.

The proposed tax adds 2 cents per gallon onto the combined state and federal 35.4-cent tax. This is the same gas tax that has been in the crosshairs of legislative Democrats for further hikes as recently as this special session. Albuquerque residents already face the highest tax burden in the state as a percentage of income. A new gas tax will affect a large number of low-income families.

According to the Brookings Institution, 80 percent of households with annual incomes of under $50,000 drive cars, and a third of them own multiple vehicles. These vehicles are often older and less efficient. The well-off can easily afford a 2-cent tax due to their additional wealth and ability to buy new, efficient cars which are even covered by onesureinsurance.co.uk/van-insurance, but the disadvantaged must pay the same tax while earning less and filling their tanks more. While 2 cents sounds like a small burden, for workers whose main focus is putting food on the table for their families, every little bit counts.

A gas tax would also have negative effects on Albuquerque’s economy. The Brookings Institute notes that such taxes drain the economy of purchasing power due to their effects on low- and moderate-income families. Put simply, lower-income families generally spend most of their income, meaning that a spending increase in one area, like gas, means that spending decreases accordingly in other areas. Decreased spending harms the economy, especially one which is still recovering from a major downturn. Thus, families are hit with a double effect: first, they must pay more for gas and lose out on spending elsewhere, and then they must deal with the effects of a slow economy.

As the ordinance is written, the tax would be used to “rehabilitate transportation systems.” This could mean directly supporting or allowing existing dollars to be diverted to the controversial Albuquerque Rapid Transit program and the city bus system. Any gas tax paid by motorists should at least be dedicated to improving and expanding Albuquerque’s roads.

Additionally, as Benton himself said recently, much of the revenue will be allocated to “outdated” roadways that are functional but for some reason or another are not compliant with the federal Americans With Disabilities Act. As well-intentioned as this may be, average Albuquerque residents and motorists want roads that get them from A to B with fewer potholes. As time passes, roads are being upgraded to comply with ADA. Adding a new tax onto the backs of local motorists now in order to comply with a law passed back in 1990 is ridiculous.

Even if the proceeds were dedicated specifically to roads, it is worth questioning what the city will receive in terms of “bang for the buck.” That’s because a significant portion of the money generated by the tax will be spent on the creation of a collection and auditing apparatus. Some of the revenue created would have to be spent on additional bureaucracy to collect, audit and set up an appeals process relating to the new tax.

Gas taxes aside, local taxpayers are facing increased tax burdens. Between Bernalillo County and the city of Albuquerque, gross receipts taxes applied to most purchases will have risen an astonishing 29 percent since 2000 once the latest round of tax hikes kicks in this July. We are reminded every day, whether from news reports or by just driving down the street, that our city has not recovered from the economic crisis of 2008. Raising taxes yet again is not likely to improve the local economy.

You can sign the Rio Grande Foundation’s petition to the City Council and Mayor Richard Berry at www.NoABQGasTax.com.

For another facile defense of Obamacare in the Land of Enchantment, check out “Potential Impact of Repeal of the Patient Protection and Affordable Care Act on New Mexico.”

The paper is authored by Hugo Vilchis, an M.D. “with more than 30 years of experience in population health, 20 of them in international health.” He’s currently the executive director of the Burrell Institute for Health Policy & Research, a “division” of the Southwest Foundation for Osteopathic Education & Research. (The Burrell College of Osteopathic Medicine is located at New Mexico State University, but does not appear to receive taxpayers subsidies — at least, not yet.)

Vilchis, who believes that repeal “would have far-reaching and negative consequences for every facet of life in New Mexico,” hopes that readers find his paper “useful and accurate,” and welcomes “any comments and feedback.”

Okay. Here goes.

“Potential Impact of Repeal of the Patient Protection and Affordable Care Act on New Mexico” suffers from the usual fallacies and oversights embraced by supporters of Obamacare. These are the most maddening:

* The “coverage” fetish. Vilchis gushes that Obamacare “has expanded health-care coverage to more than 20 million people.” But “coverage” is a tricky thing. What’s the quality of coverage? How much does it cost? Who’s paying for the coverage? Does more coverage actually lead to better health outcomes? Would a more market-oriented approach boost the affordability and quality of coverage? These questions are rarely asked by left-wing defenders of massive government intervention in healthcare. To them, more coverage is better, no matter what the unintended — and often, quite unpleasant — consequences.

* Rosy speculation about the future, little attention paid to failures of the past. Vilchis claims that U.S. healthcare spending “from 2014 to 2019 is expected to be $2.6 trillion less than projected in 2010.” But given that the optimistic prognostications of Obamacare enthusiasts have been consistently off, there’s no reason to count on the estimate’s accuracy. And remember Barack Obama’s promise to “cut the cost of a typical family’s premium by up to $2,500 a year”? It’s AWOL in “Potential Impact of Repeal of the Patient Protection and Affordable Care Act on New Mexico.” (To his credit, Vilchis admits that “premium growth has slowed substantially but continues to grow.”)

* Reliance on “research” by fellow travelers. The Center for American Progress, the Economic Policy Institute, the “Brookings Institute,” the Henry J. Kaiser Family Foundation, the Center on Budget and Policy Priorities — Vilchis draws from an awfully narrow band of analysts. Perhaps worst of all, he approvingly cites the Congressional Budget Office, claiming that if the American Health Care Act were enacted, “by 2026, a total of 52 million Americans would be uninsured, 24 million more than if the current law were left unchanged.” But the CBO’s scoring is marred by flawed assumptions and problematic methodology, as Citizens Against Government Waste, the Galen Institute, and many others have noted.

* Ignoring an obvious conflict of interest. The Burrell College of Osteopathic Medicine benefits from Obamacare’s “increased federal support for the National Health Service Corps, which provides loan forgiveness to health professional students in return for their agreement to practice in underserved areas.” Yet nowhere in “Potential Impact of Repeal of the Patient Protection and Affordable Care Act on New Mexico” is this glaring bias disclosed.

Dr. Vilchis’s “primary research interests” are waterborne diseases, bioterrorism, emergency preparedness, and environmental health. The physician should stick with what he knows, and leave policy research to those who have a fuller understanding of the regulation/taxation/subsidization of healthcare.

The Albuquerque Journal had an interesting and slightly depressing article recently about the number of jobs that remain open lacking applicants even in New Mexico, the State which has had the highest unemployment rate in the nation for several months now. According to the article, employers surveyed gave “lack of applicants” as the reason for 66 percent of the jobs described as hard to fill. “Lack of experience” was cited for nearly 41 percent of jobs.

What does this mean? It’s tough to fully get a grasp on the system, but here are a few thoughts:

For starters, it is clear that our educational system from kindergarten to the university system are not getting the job done in terms of educating people for the jobs available. It would be great to see some truly “outside-the-box” thinking applied to all levels of schooling in New Mexico, but we’d settle for greater K-12 choice and increased resources for vocational education as opposed to traditional four-year degrees. We must especially question what our current higher ed dollars are getting for the tremendous tax dollar investment when apprenticeships might be a superior and much cheaper alternative;

Also, New Mexico has an abysmally-low workforce participation rate. As of April 2017 our rate was 54.1%, 2nd worst in the entire nation. With so many jobs going unfilled, perhaps it is time to ratchet back the generous government benefits and push more New Mexicans to join the work force? Enter President Trump whose budget was (universally and unsurprisingly) panned by Democrats in New Mexico’s Congressional delegation. Trump’s budget would cut programs like SNAP, Disability, and Medicaid all of which can make not working look more attractive than working.

It is somewhat counter-intuitive that a State can have at once a severely elevated unemployment rate and so many jobs unfilled, but this is New Mexico’s reality in 2017.

Government schools in San Juan County “are increasing the number of sites offering free meals to feed local students this summer.” The “Summer Food Service Program” relies “on innovation and collaboration to reach children who need good nutrition when school is out of session.” A “federally-funded [sic], state-administered program,” eligibility isn’t exactly strict. “Open” sites subsidize meals for all children in “low-income areas.” (As the program director for Clovis’s Sacred Heart Summer Food Service noted two years ago, “A lot of the parents might think that it’s for the poor only, but it’s not — it’s for every child.”)

The Farmington MSA has one of the worst unemployment rates in the country. Many people there need help. But that’s no reason to perpetuate a program that has a dubious justification. Child hunger in the United States is essentially nonexistent. Citing date from the U.S. Department of Agriculture, the Heritage Foundation’s Robert Rector wrote that “96 percent of poor parents” reported that “their children were never hungry at any time during the year because they could not afford food.”

Meanwhile, New Mexico’s food-stamp spending for residents of all ages remains colossal. While the numbers were down somewhat from the previous year, in March, 502,701 people — a bit less than a quarter of the population — were beneficiaries of the Supplemental Nutrition Assistance Program.

Source: Monthly Statistical Reports, New Mexico Human Services Department

With Democrats on the hunt for higher taxes at both the State and local levels here in New Mexico, it is worth asking just how heavy the State’s tax burden is relative to other States. Conveniently, Key Policy Data which looks at state by state data on taxes and other economic indicators, just published a new series of charts which show New Mexico to have both a heavy and growing state and local tax burden.

As shown in Chart 1, when New Mexico’s state and local tax burden (tax collections divided by private sector personal income) is used as the measuring stick, New Mexico’s tax burden was the fifth highest in the nation for FY 2015 at 18.8 percent—or 31 percent above the national average of 14.4 percent.

Far from being “gutted,” as shown in Chart 2, New Mexico’s tax burden has increased over time by 65 percent to 18.8 percent in FY 2015 from 11.4 percent in FY 1950.

Gov. Susana Martinez will have yet another opportunity to veto tax hikes in the wake of the 2017 special session. Unfortunately, New Mexico’s future could see political leadership that gladly accepts rather than rejects tax increases.

When Santa Feans overwhelmingly voted down a costly soda tax, pundits questioned whether this might be the start of a trend in which New Mexicans take a more skeptical approach to taxes. It is hard to say for sure, but another data point has been added to the developing trend-line and the result (again) is “No New Taxes!”

Yesterday, voters in the National Lab-dominated enclave voted down a new recreation bond levy by a vote of 3,446 for to 3,932 against. At a price tag of $23 million, the proposed property  tax hike was just too much for a majority of property owners even though (as usual) the political establishment desperately wanted to raise taxes.

The Rio Grande Foundation was not involved in this particular tax battle, but it is another indicator that New Mexicans’, facing the nation’s highest unemployment rate do not see tax hikes as a good option at this time. The Rio Grande Foundation IS involved in efforts to educate Albuquerque voters about a proposed gas tax increase which will be voted on June 5. That tax hike would go to the voters if it is approved by City Council and the Mayor.

So much for tax reform.

There will be no consideration of a major tax-modification package during the special session that starts today. Calling it “not fair to the public,”” House Speaker Brian Egolf (D-Santa Fe) has decided that the timing isn’t right for a significant revamp of the tax code.

But that’s no reason to nix the final installment of our look at tax reform in New Mexico, because the taxation of Internet sales — the topic planned for today — is very much alive in Santa Fe. While the ideas enumerated in HB 412, the 333-page bill favored by the governor, are DOA in the special session, the provisions contained in SB 202 are not. That bill made a number of important tax changes, including hikes in the gasoline and diesel taxes, a big boost to the weight distance tax permit fee, and an increase of the motor vehicle excise tax from 3 percent to 4 percent.

Yet the portion of SB 202 that stands the best chance of approval in the special session is the imposition of the gross receipts tax on purchases New Mexicans make from out-of-state vendors.

Fans of bipartisanship, congrats. The “Amazon tax” enjoys strong support from Democrats and Republicans in New Mexico. And as the Pew Research Center noted earlier this week, the story is the same beyond our borders: “In 2017, six states have enacted laws or set tax rules that address the lack of tax on remote sales — Alabama, Indiana, North Dakota, Virginia, Tennessee and Wyoming. All but Virginia have Republican governors and majority GOP legislatures.”

Revenue-grubbing pols, red and blue alike, think that the issue is settled. But it’s not. Proponents of taxing Internet sales consider their policy the closing of a “loophole” that harms brick-and-mortar sellers. But as the National Taxpayer Union explains, the “‘loophole’ is actually the physical presence standard, a firmly grounded constitutional doctrine the Supreme Court has upheld for decades to protect businesses and their customers from predatory tax administrators. The physical presence safeguard helps to protect taxpayers from many types of aggressive policies that could affect income, property and other taxes.”

The Tax Foundation agrees, arguing that the “U.S. Supreme Court precedent in both the Quill and Bellas Hess rulings stipulate that a seller have nexus with a state before that state can require the seller to collect taxes for sales to its residents. The U.S. Constitution was adopted in large part to prevent states from arbitrarily imposing complicated rules on out-of-state individuals and businesses who may have no say in how those taxes are administered.”

With so many states targeting Internet commerce, the issue will surely be addressed, once again, by the High Court. And the outcome, give the present lineup of justices, is anyone’s guess. Relying on the “new money” Santa Fe would get from applying the GRT to online sales could prove to be a sucker’s bet.

HB 412 doesn’t suffer from lack of ambition.

We explored several facets of the 333-page bill yesterday. Today, as legislators make their way to Santa Fe for the special session, Errors of Enchantment examines the way the tax-reform package favored by the governor substantially eliminates deductions, exemptions, and credits that are applied to the gross receipts tax.

Statutorily, the GRT is imposed on “the total amount of money or the value of other consideration received from selling property in New Mexico, from leasing or licensing property employed in New Mexico, from granting a right to use a franchise employed in New Mexico, from selling services performed outside New Mexico, the product of which is initially used in New Mexico, or from performing services in New Mexico.” But over time, an increasing number of sales have been able to escape the levy’s bite — carve-outs have been written into tax law for what politicians deem to be “public” purposes.

Reform of the GRT’s metastasizing deductions, exemptions, and credits has been a goal of all sides in the state’s tax community for some time. There’s general agreement that a broader base and a lower rate promote both stability in revenue-collection and simplicity in compliance. (Corruption, too, is lessened when elected officials don’t pick winners and losers in the marketplace.) So HB 412, which would convert the GRT into a “sales tax,” slashes away at perks that politically powerful customers/vendors have enjoyed for decades. Here’s a sampling of currently untaxed (or partially taxed) transactions that would be subject to the levy if the legislation were signed into law:

* “selling fuel, oxidizer or a substance that combines fuel and oxidizer to propel space vehicles or to operate space vehicle launchers”

* “the sale of fuel specially prepared and sold for use in turboprop or jet-type engines”

* “hosting world wide web sites”

* “selling wind generation equipment or solar generation equipment to a government for the purpose of installing a wind or solar electric generation facility”

* “selling newspapers, except from selling advertising space”

* “producing or staging a professional boxing, wrestling or martial arts contest”

* “the sale of textbooks and other materials that are required for courses at a public post-secondary educational institution if the sale is by a bookstore located on the campus of the institution and operated pursuant to a contractual agreement with that institution and the sale is to a student enrolled at the institution who displays a valid student identification card”

Check out the Legislative Finance Committee’s analysis of HB 412 for the full list. But if anything, the legislation’s pruning doesn’t go far enough. The exemption for sales of groceries, not a sound policy change when adopted in 2005, would remain. (The value of the exemption is nearly $240 million.) And many deductions/exemptions to special industries and activities would stick around, such as:

* “race purses at … horse racetracks subject to the jurisdiction of the state racing commission”

* “the sale or lease of real property and from the lease of a manufactured home”

* “the sale by a qualified contractor of qualified research and development services and qualified directed energy and satellite-related inputs … when sold pursuant to a contract with the [Pentagon]”

Despite its oversights, HB 412’s targeting of deductions, exemptions, and credits represents a large step toward uniformity and distortion-reduction in the Land of Enchantment’s tax architecture. That’s good news, and perhaps a model for greater simplification to come.

Tomorrow we’ll look at the way HB 412 seeks to apply the GRT/sales tax to transactions conducted over the Internet — and why the proposed provision is unwise and probably unconstitutional.

With fiscal conditions in the dumpster, it might not be the best time for New Mexico to slog through an overhaul of its tax code.

And as State Rep. Candie Sweetser, a Democrat from Deming, points out, a special session — one that taxpayers should hope will be short — does not offer much time “to analyze different proposals and amendments, hold public hearings and legislative debates, and provide New Mexicans with adequate opportunity to monitor the issue and express their opinions to their legislators.”

Throw in the facts that the legislature is controlled by a party comfortable with — if not eager to adopt — tax hikes, while the executive branch is run by a governor who has pledged not to raise taxes, and it’s not unreasonable to question the timing of a sweeping tax redo.

But Susana Martinez has repeatedly stressed her desire for the special session to achieve “comprehensive tax reform,” specifically citing HB 412, a hugely complex bill that passed the House of Representative but died in the Senate during the regular session.

It’s far from perfect, there’s a lot to like about HB 412. Here are a few highlights:

* A ban on soda taxes: Current law bans local governments from imposing excise taxes on tobacco, liquor, motor fuels, and motor vehicles. HB 412 adds “food or beverages” to the list. That’s a great idea — the Nanny State’s case against sugar-sweetened beverages is pathetically weak, and the money committed on future soda-tax battles in the Land of Enchantment would be better spent elsewhere.

* More revenue for roads: The excise tax assessed on sales of motor vehicles is set at 3 percent. The funding stream the levy creates does not flow toward transportation expenditures, but into the general fund. Starting in fiscal 2019, HB 412 distributes 50 percent of the excise tax’s revenue to the state road fund and 50 percent to the local governments road fund. The New Mexico Department of Transportation estimates that in the first year of the change, $159 million in “new money” will become available.

* Local GRT simplification: Villages, towns, cities, and counties can now impose levy hikes for prisons, “environmental services,” hospitals, “fire protection,” and “quality of life” expenses. HB 412 scraps all the earmarked increments, replacing them with a single rate. The New Mexico Municipal League noted that the shift would empower local governments to “raise and expend funds in response to federal and state requirements and local demands and conditions.”

* Renaming the GRT the “sales tax”: The change is terminology may not be momentous, but it is welcome, because the levy, as currently constituted, is a sales tax. The state admits it: “Although the gross receipts tax is imposed on businesses, it is common for a business to pass the gross receipts tax on to the purchaser either by separately stating it on the invoice or by combining the tax with the selling price.”

Tomorrow we’ll look at how HB 412 eliminates many of the dedications, credits, and exemptions that infect today’s GRT.

New Mexico’s junior member of the U.S. Senate doesn’t know much about anything, but when it comes to energy and economic development, his ignorance runs especially deep.

In a grueling interview with Albuquerque’s Weekly Alibi (sample question: “Do the [healthcare] reforms, as expressed by the Republicans in their legislation, constitute a danger to America’s middle class?”), Martin Heinrich boasted that he “worked really hard to work on renewable energy development and infrastructure management, so that we can become net exporters of clean energy to the rest of the country.” The Land of Enchantment’s awful governor hasn’t been much help, apparently, but “in Washington, we passed a set of incentives for wind and solar that are driving growing industries in Albuquerque and Santa Fe, Las Cruces, too.” The solon touted “investment” in wind power in rural New Mexico, which “creates permanent jobs for technicians who will be living in those rural communities.”

We’ve long known that as a job-creation mechanism, “clean energy” disappoints. And a new survey from the left-leaning Brookings Institution finds that one important type of funding for politically correct power is drying up: “Between 2011 and 2016, [venture capital] cleantech investment declined by nearly 30 percent, from $7.5 billion to $5.24 billion.” Even worse, VC in the sector is “heavily clustered in just four metro areas — San Francisco, San Jose, Boston, and Los Angeles.”

Meanwhile:

* Oklahoma is abandoning its “zero emissions tax credit,” through approval of a bill that one legislator promises “will save the state a significant amount of money moving forward, freeing up revenue that can be used on high priorities like education, public safety and health care”

* a new analysis published by the Institute for Energy Research concludes that despite spending €1.1 trillion on “green power,” European Union countries’ “investment has provided little in terms of generating capacity and output”

* rampant NIMBYism, from coast to coast, plagues proposals for wind and solar facilities

New Mexico’s northwest corner, where the bulk of the state’s coal and natural-gas production takes place, continues to suffer from one of the worst unemployment rates in the nation. Does Martin Heinrich care?

The Rio Grande Foundation, New Mexico’s only free market think tank, launched the #NoABQGaxTax education campaign today to inform Albuquerque residents about City Councilor Isaac Benton’s plan to impose a new tax on local motorists – a 2-cent per gallon gas tax.

The online campaign, centered around www.NoABQGasTax.com, will highlight the regressive nature of Benton’s proposed tax increase while alerting Albuquerque residents to the fact that the tax would not be dedicated to road construction or new river crossings, but to “rehabilitate transportation systems,” such as the despised Albuquerque Rapid Transit system.

The tax hike will be voted on by City Council on Monday, June 5, 2017.

“The tax hikes are coming fast and furious these days even though voters in liberal Santa Fe sent a clear message when they rejected Mayor Gonzales’ soda tax,” Rio Grande Foundation President Paul Gessing said. “New Mexicans don’t have an appetite for higher taxes. The Albuquerque City Council should follow Santa Fe’s lead and reject Councilor Benton’s tax increase.”

Benton’s is a new city tax that will be added on top of the 35.4 cents per gallon motorists already pay in taxes. Of course, earlier this year the Legislature passed a separate 10 cent per gallon increase that may be pushed once again in the upcoming special session. If these If these taxes pass, it will cost $7 in taxes alone to fill up a tank of gas.

Additional #NoABQGasTax Facts:

• Residents of Albuquerque already face the heaviest tax burdens as a percentage of income of any city in New Mexico, even Santa Fe.
• A report from the Brookings Institution stated high prices at the pump “do affect both consumers and the economy adversely, and they are especially harmful to lower- and moderate-income households.”
• Tax collection requires auditing and a collection policy, as well as an administrative appeals process. In other words, administration and compliance costs will eat up a significant portion of the revenue generated.
• This tax will not be dedicated to road construction or needed river crossings, but to “rehabilitate transportation systems.”

If this tax is adopted by City Council, it will appear on an already-crowded fall municipal election ballot in October.

Joel Kotkin and Michael Lind, authors of “The New American Heartland,” believe that “the productive economy that is anchored in the middle of the country” has the potential to foster “the kind of growth that benefits and expands the middle class.”

Their new report, published by the Houston-based Center for Opportunity Urbanism, should be required reading for New Mexico policymakers. While the Land of Enchantment isn’t on the map of the New American Heartland depicted above, we’re adjacent — and there’s no reason why the state cannot be a part of the opportunity and prosperity Kotkin and Lind foresee.

Contrary to public-payroll, chase-the-latest-trend specialists in “economic development,” the scholars note that many desirable jobs fall outside “the knowledge economy.” Goods-producing industries pay “higher wages than personal services, health care, education and hospitality,” and for those without college degrees, “blue-collar work in fields such as installation and repair, construction and extraction, manufacturing production, and transportation” offers sustainable livelihoods. Even the highly touted “brain centers” found in deep-blue zones are beginning to experience a hollowing-out, with “more households with incomes over $100,000 annually … leaving states with strong information technology and financial industries than … arriving. These places include California, New York and its New Jersey and Connecticut suburbs, Massachusetts, and the Washington, DC area (District of Columbia, Maryland and Virginia).”

“In the race to feed the larger, more affluent, urban populations of the future, the US has a head start,” and New Mexico’s farmers and ranchers will have opportunities to expand their production of beef, dairy products, nuts, and feed crops. (Meat consumption, worldwide, is “expected to grow from about 85 to 109 pounds per capita in 2050, and 122 pounds in 2080.”)

As for energy, the sky’s the limit. Even accounting for the downturn that began more than two years ago, fracking “has created … hundreds of thousands of high-paying jobs, not just for geologists and engineers, but also for blue-collar workers. Overall, energy jobs pay as well, and often better than, those in the heralded occupations, such as finance, business services and information.” As the U.S. intensifies its exports of petroleum and natural gas to Europe, South America, and Asia, New Mexico is poised to significantly boost its production of hydrocarbons.

Manufacturing poses the biggest obstacle for New Mexico to become a member-in-good-standing of the New American Heartland. The “Northeast and California continue to deindustrialize,” while the “fastest growing industrial regions are led by Grand Rapids, Louisville, Nashville, Detroit, Austin, Oklahoma City, Cincinnati, Columbus, and Minneapolis, all firmly located in the Heartland belt.” The trend in the Land of Enchantment has been terrible, as the data below depressingly depict. But that can be changed, with the kinds of policies that the Rio Grande Foundation has been advocating for years: tax reform/relief, adoption of a right-to-work law, removal of the mandates that make electricity more expensive, and school-choice options that tech the kinds of skills manufacturers need.

New Mexico’s in dire straits. But “The New American Heartland” supplies a reminder of a core state strength: the cost of living. Housing, in particular, provides a competitive advantage in the battle to attract entrepreneurs, investment, and workers.

Kotkin and Lind consider the New American Heartland the “logical epicenter” of a “flourishing and dynamic tradable sector” tapping “enormous markets at home and abroad,” and generating “economic opportunities for a broad swath of working and middle class Americans.” Will New Mexico join in, or remain an outsider, mired in government-dominated employment and a metastasizing welfare state?

Source: Daniel J. Chacón, “Voters smack down mayor’s beverage tax proposal,” Santa Fe New Mexican, May 3, 2017

Errors of Enchantment doesn’t like to gloat.

But we’ll admit it — we’ve been grinning, ear to ear, since a majority of Santa Fe’s voters rejected Mayor Javier Gonzales’s sugary-beverage tax two weeks ago.

But the Nanny State is still smarting, and pouting, over the defeat. On Sunday, the mayor’s daughter “wrote” a piece for the Santa Fe New Mexican, thundering that “we will not go down as a whisper but a roar for equality that I hope will reach all corners of the nation.” Cameron Gonzales, who “volunteered with Pre-K for Santa Fe for her senior internship,” wailed that there “were many side effects of the Trump era that we couldn’t see coming,” linking an “overwhelming sense of anger at the government overstepping its boundaries, deeply rooted anti-intellectualism and the ability of large corporations to stomp on the voice of the people” to the beverage tax’s defeat.

But there’s a pesky flaw in her argument: Santa Fe overwhelmingly voted against Donald Trump.

If Gonzales had bothered to survey the official results in Santa Fe County, she’d have learned that Trump prevailed in just seven of 90 precincts. Each win was in the extreme southwest portion of the county. In the city itself, Trump was annihilated — in some precincts, Hillary Clinton topped 80 percent of the vote. Even in the parts of Santa Fe where the beverage tax enjoyed the least amount of support (District Three and District Four, depicted above), Trump was soundly defeated.

Maybe — just maybe — Santa Feans rejected the mayor’s nannying because it disproportionately impacted lower-income households, was sure to damage the economy, and wasn’t needed to augment revenue for a preschool bureaucracy that was already generously funded?

From a free-market perspective, the commander-in-chief is a mixed bag. On trade, he’s terrible, on taxes, inconsistent, and on energy policy, downright virtuous. But “the Trump era” had precisely zilch to do with Santa Fe’s rejection of a sugary-drinks tax. If supporters of the tax-drinks-to-pay-for-pre-k scheme keep telling themselves that The Donald is to blame for their first defeat at the hands of voters, they should expect losses in many more communities to come.

It only took six years, but the Martinez Administration has officially “declared war” on the teachers unions. In a recent speech, Education Secretary Hanna Skandera said, “We have an entrenched political establishment called unions that fundamentally enjoy keeping us where we are because they serve the adults… At the end of the day, the politics around the adult issues have too many times sacrificed our kids and their education.”

If anything, Skandera could be criticized for taking so long to state the obvious. This actually follows a trend we’ve picked up on in which the Martinez Administration has taken a more direct and active approach in making its points. We welcome this trend although at this point it is unlikely that we’ll see any significant education reform initiatives in the waning days of the Martinez Administration.

Unfortunately, early on when she had momentum and the “bully pulpit,” rather than pushing hard on school choice (clear messaging, strong polling), Martinez attempted to impose a convoluted, centralized accountability system that has not worked out particularly well and will likely be dismantled by her successor. The unions were going to oppose whatever Martinez did, so she should have gone after something big and lasting (it is tough to take school choice away once parents have it).

The following op-ed ran in the Albuquerque Journal May 15.

Arizona Can Teach Us a Few Things

By D. Dowd Muska

Research Director, Rio Grande Foundation

It was a tale of two sessions.

As New Mexico lawmakers prepare to return to Santa Fe to meet the budget-passing obligation they avoided months ago, Arizona’s legislators are heading home. There will be no special session for the Grand Canyon State, which not only adopted a fiscal plan that included no tax hikes but also enacted a number of bold reforms that will boost education quality and economic development.

Arizona was one of the states most devastated by the housing bust and financial crisis. In December 2009, unemployment there reached at a jaw-dropping 11.2 percent, almost three percentage points higher than the peak jobless rate in New Mexico. Now, Arizona’s unemployment rate is 5.0 percent — just a bit higher than the national figure. Jobs there have surpassed their previous total and continue to grow. Since hitting rock bottom, nonfarm employment in Arizona has surged by 15.4 percent.

The comparable data for New Mexico are depressing. We have yet to regain the jobs lost during the Great Recession — one of only a few states claiming that dubious distinction. Unemployment here is 6.7 percent, the highest in the nation.

Arizona’s had wiser public policies than New Mexico for decades, and there’s no question that its pro-growth, pro-taxpayer posture helped it climb back from hard times just a few years ago. But this session, legislators in Phoenix went further, embracing deregulation in ways that Santa Fe should notice.

In his January State of the State address, Gov. Doug Ducey observed that Sandra Day O’Conner had been a member of the Arizona legislature, serving as “the first woman majority leader … in the entire country” before becoming the first woman to serve on the U.S. Supreme Court. But “after her retirement in 2005, if she had wanted to teach civics in an Arizona high school classroom, she would have been deemed unqualified by the system.” So when legislators passed a bill that requires the adoption of “substantially different” rules for “alternative teacher and administrator preparation programs,” the governor eagerly signed it, calling the legislation a tool to empower principals “to make hiring decisions and attract the best individuals to serve our students.”

Reforming who can work in government schools was good. Expanding choice was better. Arizona already had a limited form of education savings accounts prior to the session, but Ducey and the legislature made “Empowerment Scholarship Accounts” universal. Now parents of any type of student will receive an average of $5,600 for tuition, tutoring, homeschooling materials and other qualified expenditures. (An enrollment limit was established, but look for that stricture to be loosened in a state that has long been a choice pioneer.) Research has shown ESAs to be very popular and employed in a myriad of ways. Furthermore, many parents have “skin in the game” by augmenting an ESA with their own financial contributions to their children’s education needs.

Finally, Arizona has put occupational licensing under a microscope. Barack Obama’s Council of Economic Advisers concluded that “the current licensing regime in the United States … creates substantial costs, and often the requirements for obtaining a license are not in sync with the skills needed for the job. There is evidence that licensing requirements raise the price of goods and services, restrict employment opportunities and make it more difficult for workers to take their skills across state lines.” Arizonans will soon benefit from the Right to Earn a Living Act, which bars state bureaucracies from promulgating regulations that “on their face or in their effect limit in the entry into a profession or trade,” unless justified by health/safety concerns.

With the worst dropout rate in the nation, the Land of Enchantment is in desperate need of sweeping changes in education. And with arguably the bleakest economy in the country, entrepreneurs and workers need relief, fast. In 2017, we’ve seen how the New Mexico and Arizona legislatures take very different policy paths. It’s a divergence that produces drastically different results in the two states.

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.

Tax reform will be on the agenda for the special legislative session set to begin on May 24. The Rio Grande Foundation supports policies that will result in lower tax rates and fewer loopholes. To be clear, we don’t support ANY further addition to New Mexicans’ tax burdens. The story left that particular information on the “cutting room floor.”

Nonetheless, our position has been consistently the same: exempting groceries from the GRT and raising rates on other items was bad tax policy. Voices for Children actually agreed with us at the time, but now opposes re-imposing the tax on groceries as reflected in the story.

Embedding the story proved impossible, so click on this link.