Why the Governor should veto the omnibus tax bill

2018-04-03T12:39:40+00:00 Blog Posts, Tax and Budget Blog|

by Gerry Bradley
March 29, 2013

It sounds like something out of a political thriller movie: hastily cobbled together legislation is railroaded through with a vote in the closing minutes of a session. The truncated debate that takes place is woefully uninformed because no one has had time to read the bill. Nor is there time for public input. This scenario did not play out in Hollywood, but in Santa Fe when legislators were given 35 pages worth of amendments to House bill 641 and told to vote on it before the clock struck 12. What they were not given was any meaningful information about the fiscal impact of what they were voting on. In fact, they were misled.

Tom Clifford, the Secretary of the Department of Finance and Administration, and one of the architects of this package of huge corporate tax breaks, was given the microphone on the floor of the House in the closing minutes of the session so he could reassure legislators that the bill would be “revenue positive” every year. He actually made that statement twice—and both times it was wrong.

A few days later—when the Legislative Finance Committee released its fiscal impact report (FIR)—it became clear that HB-641 will NOT be revenue positive but will, in fact, cost the state tens of millions of dollars within the first three to four years.

Legislators should not be expected to vote on an omnibus tax bill before the proper fiscal analysis has been completed. Such bills are too complex and the consequences too important. Nor should they be pushed into passing legislation under the threat of a budget veto by the governor.

The two main (and most expensive) portions of the bill give breaks to manufacturing companies and profitable corporations. We are told that these two provisions will make New Mexico more “competitive” with other states when it comes to luring business here. This is a deviation of the worn-out notion that tax cuts at the top will trickle down to jobs at the bottom (or, perhaps, somewhere in the middle). But, after 40-some years of this economic experiment, we’ve pretty much learned that it simply doesn’t deliver on its promises.

There is, in fact, absolutely no evidence that corporate income tax cuts create jobs. There is, however, abundant evidence that tax cuts starve our state budgets of funding for vital services like education, public safety, and health care. The upshot is, New Mexicans will either have to live with fewer services or will have to pay higher taxes to make up for the lost revenue.

These cuts are being paid for, in part, by the state reneging on a promise it made to cities and counties regarding revenue the state no longer wants to pass along. To help the municipalities recoup this loss, the legislation kindly allows them to raise taxes on the rest of us. Which they probably will.

In other words, profitable corporations are getting tax cuts on the backs of New Mexico’s children and working families.

To add insult to injury, the Governor—who is not likely to veto this bill—has promised to veto a bill that raises the minimum wage. Her reasoning there is just as flawed as trickle-down economics. She claims raising the minimum wage will make New Mexico less competitive with other states for new jobs. That’s only true if you’re hoping to lure low-wage jobs to the state (and, really, we have enough of those already). If you’re trying to create decent jobs by reviving the economy, putting money into the hands of the people most likely to spend it is a really good idea.

Governor Richardson promised that his personal income tax cuts of 2003 would create jobs because companies would relocate their corporate headquarters here so their highly paid staff could benefit from the low top tax rate. A decade later, we’re still waiting for those jobs to appear. We suspect that, once it becomes clear that this year’s tax cuts are also not creating jobs, some legislators may regret their 11th-hour vote.

To paraphrase an old saying: Pass a bill in haste; regret in leisure.

Gerry Bradley is NM Voices for Children’s Senior Researcher and Policy Analyst.