The Positive Economic Impact of Richardson’s 2003 Tax Cuts

Governor Richardson's big-spending ways have often drawn the ire of fiscal conservatives (like the Rio Grande Foundation), but there is no doubt that the 2003 tax cuts which he pushed through the Legislature that year have resulted in a burst of economic prosperity for New Mexicans, especially when compared to other states.

In fact, as personal income data from the U.S. Dept. of Commerce, Bureau of Economic Analysis and compiled online by New Mexico’s own Bureau of Business & Economic Research clearly shows the upward trend that started after 2003.

Read the full text of the new study here.

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2 Replies to “The Positive Economic Impact of Richardson’s 2003 Tax Cuts”

  1. So, you want me to believe there is a correlation between the 2003 tax cuts and personal income. Sorry but I don’t buy it. When it comes to cause and effect statements, there can be many causes for a single effect (personal income). For example, what about the role of interest rates. Interest rates were steadily decreasing during the 2003 to 2009, for the most part. Low rates put more money in peoples pockets as they refinance homes. Low rates also spur growth in credit cards, cars and other big ticket items.

    How about demographics. Baby boomers are retiring and most seek warmer environments. I moved to NM in 2006 because I grew up here not because it was lowest in taxes. I did look at El Paso but rejected it because of the outrageously high property taxes plus other reasons. States need tax money and the “no income tax” highlight is nothing but a tease. To really gage a state’s tax burden you have to look at all taxes and “fees”. Some states charge a small fortune just to register a car. AZ, CA, CO and TX to name a few.

    How about overall business climate. According to the Tax Foundation, NM rates as #23 in 2010. Looking back to 2006 I see we have rated as low as #29. All in all, no bad, although I would like to see improvement.

    Finally, how about big spending to attract jobs and people. Your article talks about people from CA moving to NM. With the film industry being one of Richardson’s pet projects, it makes sense that a number of Californians would relocate to NM given all the money he poured into attracting them.

    Bottom line. You can’t prove the 2003 tax rate cut resulted in an above average rise in personal income without discounting every other variable.

  2. I agree with Mark R, and his observation that many factors could be involved. For example, the Rio Grande Foundation has determined that 25% of all jobs in NM are in state and local government (the second highest % in the country). If you add in federal employment, the % is probably close to 30%. As we all know, the public sector is a monopoly and has suffered very few layoffs compared to the private sector. Considering that NM has huge public sector employment compared to other states, and that there have been few layoffs in the public sector, is it not plausible that going from #47 to #42 is a result of our huge public sector employment that has remained nearly constant (or increased in size) over the last five years?

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