by Bill Jordan
June 10, 2013
Once again this year the Legislature overwhelmingly passed a requirement to track all of our state’s tax breaks and, once again, the Governor vetoed it. She said in her veto message of SB-7 that such a report is not necessary because, “the Taxation and Revenue Department (TRD) compiled a thorough report in 2012.” No one I know thinks the TRD report was “thorough” and that’s why SB-7 passed 37-0 in the Senate and 58-10 in the House. Almost all members of both parties obviously felt strongly that the TRD report was not “thorough” enough and wanted a better one. They clearly believe that tracking tax breaks makes for better tax policy and more accountability.
Almost all states and the federal government create a tax expenditure report. It allows the state to see how much each tax break is actually costing so lawmakers can determine if those tax breaks are worth what they cost taxpayers. This is important because it gives lawmakers information so they can consider changes in tax policies that turned out to be too expensive or simply ineffective.
It’s also important because when legislators pass tax bills they only have an estimate of what the eventual cost will be. Lately, the estimates generated here in the Land of Enchantment have been quite disenchanting—and quite wrong. In 2012, for example, a bill that legislators were told would cost just $40 million ended up costing more than $90 million. The mistake was bigger than the tax break!
The big tax bill that was passed in the 2013 session, however, is the bill most likely to go down in legislative infamy. HB-641, which started out as an expansion of film and TV tax credits (and as such was dubbed the “Breaking Bad” bill), was amended in the final minutes of the session. Thirty-five pages of tax law were added to the bill and both chambers were asked to vote on it even though no one had had time to read it. What’s worse—the staffers who estimate what such bills will cost, had no time to issue the required Fiscal Impact Report (FIR). Instead, the Secretary of the Department of Finance and Administration told the House of Representatives that the bill would be “revenue positive”—meaning it would cost the state nothing, but rather bring even more money into the state coffers instead—each and every year.
He was quite wrong. Since the bill was passed, three FIRs have been issued—each subsequent FIR estimating a higher and higher cost to the state. There is no telling how the votes would have come down had at least one FIR been available in time. It’s possible, though, circumspect legislators would have at least mandated that some accountability measures be included.
It’s odd that accountability measures rarely seem to show up in tax bills. And yet, the Legislature has, three times now, demanded the ultimate accountability measure—a tax expenditure report.
The Governor, however, who vetoed the tax expenditure bill practically in the same breath that she signed the omnibus tax bill, doesn’t seem to want any accountability at all.
Since this is the third time a tax expenditure budget bill has been passed and vetoed (the previous governor vetoed the first one), legislators might want to try a different tack. Instead of trying a fourth time, perhaps they should override the most recent veto and finally put some accountability for tax breaks into law!
Bill Jordan is NM Voices’ Senior Policy Advisor/Governmental Relations.