Albuquerque
- The assumption that tax cuts lure business to New Mexico and stimulate the state's
economy is wrong, according to a new study released by New Mexico Voices for Children.
The report "Personal Income Tax Cuts ¹
Economic Growth"
documents disturbing news about the impact of the personal income tax cut that
was passed in 2003, and counters claims by the Richardson administration that
it would have a positive impact on the economy.
No
New Job Growth Since Tax Cuts
Job growth since the tax cut was enacted
has been exactly what was predicted before the tax cuts. "This study shows
that the idea that the reducing personal income taxes creates jobs or improves
the economy in any way is a fairy tale", said Gerry Bradley, Research Director
of New Mexico Voices for Children. "In fact," he continued, "this
tax cut has not only failed to stimulate new job growth, it has failed to improve
job quality and median income for the majority of New Mexicans".
The
expected job growth, forecast by the University of New Mexico's Bureau of Business
and Economic Research was almost exactly what the state experienced in actual
job growth: 1.2% for 2003 and 1.9% for 2004. This forecast was done before Richardson
took office, and before the tax cuts were enacted. Predictions are that job growth
will deteriorate in 2008 and 2009 - the years when the impact of the tax cuts
are greatest.
"It's
clear that the job growth that has occurred would have occurred anyway - without
these tax cuts", continued Bradley. "The only difference the cuts have
made is to starve the state budget of $166 million this year - and $360 million
by 2007 when they are fully phased-in. These tax cuts were supposed to help everyone.
Instead, they have largely benefited the wealthy. The benefit to the rest of us
has been minimal. And when you take into account cuts to education and healthcare
as a result of the tax cut, most people in New Mexico are worse off", he
concluded.
Job
Quality Worse: Lower Wages
According to U.S. Bureau of Labor Statistics,
the quality of jobs in New Mexico has gotten worse since 2003. The jobs that New
Mexico has gained (in expanding sectors such as mining, construction, retail trade,
educational services and real estate) are not as good as the jobs the state is
losing (in shrinking sectors such as manufacturing, utilities, agriculture, information,
finance and insurance). The average weekly wage in the sectors where new job growth
is occurring is $51 per week - or $2,652 per year - less than the average weekly
wage in the jobs being lost to New Mexico's economy.
Businesses Value Prepared, Accessible Workforce Far More
Than Tax Cuts
A recent survey conducted to inform state business efforts in Louisiana sampled
non-Louisiana-based businesses on the most important factors they consider in
location decisions. Workforce issues, including labor productivity, labor costs
and the availability of skilled labor - were ranked most important by over 70%
of the 945 respondents. Only 21% ranked taxes and incentives as the most important
consideration.
"Tax
cuts are not what businesses need to be enticed to locate in New Mexico",
commented Bradley. "What they most need is an adequate investment by the
state in education of our workforce".
Tax
Cuts Result in Reduced Spending on Education, Workforce Preparedness = A Net Loss
"When tax breaks for people who are already in the higher-income brackets
result in an inability by the state to pay for education and healthcare, it's
a net loss to New Mexico's economy and our families", concluded Bradley.
He continued: "It's time to have a discussion about tax breaks in New Mexico
that is evidence-based. The use of tax cuts as a cornerstone of economic development
policy is a strategy discredited by both the research and experience". A
more effective economic development strategy would be to make a greater investment
in education and to offer incentives for home-grown business development.
