Don’t Waste New Mexico’s ‘Unique’ Opportunity – Los Alamos Reporter
BY PAUL J. GESSING
Rio Grande Foundation
New Mexico is in a unique economic situation. Despite the nation’s highest unemployment rate for all of 2022, our incredibly strong oil and gas industry, backed by high prices and rapid production growth, has given Santa Fe politicians “more money they don’t know what to do with it.” So, in the recent 30-day session, we saw over $1 billion in spending increases and significant tax cuts. Then, in a special session, rebates to be paid to taxpayers and non-taxpayers alike.
The push to return money generated by the oil and gas industry to New Mexicans is welcome, but there are serious questions about the legality and logistics of handing out checks to those who don’t pay taxes. in the state. Additionally, asking the IRS to distribute money “only” to those who deserve it is an unenviable and impossible task that also appears to violate the state’s anti-donation clause.
But, after three years of tax hikes by Lujan Grisham and the Democrats, it’s hard to complain that the money has been clawed back.
Of course, it’s an election year, and by all accounts, Democrats, including Governor Lujan Grisham, face a difficult political environment. Rising inflation is never popular. And, as COVID-related concerns wane and voters consider Lujan Grisham’s record in his fight against it to be balanced against economic concerns and their children’s education and mental health, the the government’s balance sheet seems insufficient.
A recent report from the National Bureau of Economic Research found that only New York and New Jersey fared worse than New Mexico during the COVID 19 pandemic. Considering that New Mexico’s economy remains weaker than that of our neighbors, that our children have missed more school and faced steep declines in reading and math, and that none of this has caused New Mexico to have particularly good COVID outcomes in terms of lives lost, only lends credence to the report.
In the absence of a strong record on these fundamental issues, the government clearly plans to use the remittance of oil and gas-generated cash to its political advantage. That may help her re-election chances, but nothing she and the legislature have done to date will improve New Mexico’s overall economy, which remains contested.
The fundamental economic problem facing New Mexico is its unattractive business climate. The issue of the Gross Receipts Tax (GRT) and its “pyramid” and the taxation of services as business inputs has been discussed for years, but it is time to seriously consider reforms as well bolder economics such as reducing or even phasing out personal income taxes in New Mexico.
Indeed, personal income taxes are expected to raise just over $2 billion in fiscal year 2023. That’s a lot of money, but New Mexico has the ability to cut tax rates. taxation over time. Combined with business-friendly TSO reform, modest budget restraints (annual spending simply can’t increase by 15%), and a focus on truly diversifying New Mexico’s economy, this could allow New Mexico to become exempt from income tax.
There are already 9 states that have no income tax. Most New Mexicans know that Texas, with its prodigious oil supplies, doesn’t tax personal income, but most other states that don’t have income taxes have nothing to do with it. our oil and gas revenues. Florida has no income tax. Same thing with Tennessee and South Dakota. New Hampshire has no income tax or sales tax. None of them have significant oil revenues.
New Mexico has suffered from economic and social mismanagement in recent years. Record oil and gas revenues are helpful, but as New Mexicans look ahead to the upcoming election, it should be more apparent than ever that more spending hasn’t and can’t solve America’s social ills. State. It is time to find truly bold solutions.
New Mexicans simply cannot pass up this oil and gas fueled opportunity.