by Bill Jordan
October 3, 2013
The momentum for the Governor’s big corporate tax cut that was passed earlier this year began in 2012 when the Legislature’s tax committee met at the sprawling Intel plant in Rio Rancho. It was there that Intel gave legislators a tour of the plant and lunch, and tax experts explained that Intel was paying more in corporate taxes here than in other states where they have manufacturing plants.
Because corporate taxes are confidential in New Mexico we don’t know for sure how much Intel paid, but it’s probably safe to say the computer chip giant paid as much as $20 million or more in some years. The argument was that if Intel could pay less tax in other states, they would choose to expand operations in those states instead of New Mexico. So the Governor proposed that the Legislature relieve Intel and other manufacturers from the responsibility of paying most, if not all, corporate taxes in New Mexico. In the closing minutes of the 2013 legislative session, legislators agreed to the deal. Taxes were cut by tens of millions of dollars, meaning there will be that much less to spend on education, health care, public safety, and other services.
Lawmakers gambled. They bet that their trade off of education funding in exchange for jobs at Intel or other manufacturing plants would pay off. It took less than a year for Intel to show them just how wrong they were.
Sandoval County—where Intel is located—also bet on jobs. The county made a pact with Intel in 2004 that traded a $16 billion bond deal in exchange for a commitment that 60 percent of its new hires would come from New Mexico. Last year Intel hired 74 new employees and only 19 of those were from New Mexico. The company has missed that 60 percent target three of the last four years, according to the Albuquerque Journal. The reason? Intel said it couldn’t keep its end of the bargain because New Mexico doesn’t have a well-educated workforce. At least Sandoval County had an accountability measure built into their deal: Intel had to pay the county $100,000. But the manufacturer got that back and more in the form of tax breaks from the state.
The massive state tax cut passed by the Legislature had no accountability measures. No triggers, no targets, no claw-backs to ensure that the tax breaks wouldn’t cost the state if they didn’t deliver. Lawmakers reduced the amount of money coming into the state’s budget—money that could have been used to train our future workforce—and instead gave that money to Intel’s shareholders in the hopes that they would expand operations in New Mexico. Not only did Intel not expand operations in New Mexico, the company just announced they are reducing their Rio Rancho workforce by 400 employees. What a kick in the teeth!
But alas, some still say Intel will expand here again. Well, let’s hope. But if they do, don’t expect them to hire New Mexicans, because as they’ve already told us, they can’t hire New Mexicans because we don’t have an educated workforce.
Bill Jordan is NM Voices’ Senior Policy Advisor/Government Affairs.