With tax reform taken off the agenda by New Mexico’s Democrat legislative leaders, it is clear that the 30-day session will be more about going through the motions and positioning for 2018 than about considering much-needed economic reforms. This is unfortunate because in spite of higher oil prices, New Mexico remains mired in an economic slump.
The unemployment rate remains elevated at 6.1 percent (2nd-highest in the nation) and as Bruce Krasnow reported recently in the New Mexican, “the state is in the midst of its slowest population growth since statehood — and that is not likely to change.”
One would think that, given these (and many other problems), the Legislature would be on a mission to enact as many needed reforms as possible in the coming short 30-day session. Unfortunately, the list of reforms that won’t happen is much longer than those that might be considered. Here’s a few that the Rio Grande Foundation has put forth over the years that are “off the table.”
• Aforementioned revenue-neutral reform of the gross receipts tax;
• Adoption of “Right to Work” to allow workers to choose whether to join a union or pay union dues;
• Repeal of “Davis-Bacon” prevailing wage law which unnecessarily increases cost of school and road construction;
• Reform of occupational licensure to eliminate obstacles to work for low-income New Mexicans (New Mexico has the 9th-most onerous licensing laws in the nation);
• School choice to give parents of students in failing schools the ability to get their children a better education.
No economic reforms are likely in 2018. Instead, Democrats seem to be planning for a return to complete control of the policy-making process. Going back to 1931, Democrats have had both houses and the governorship approximately two-thirds of the time while Republicans haven’t had such political control for so much as a single year during that time frame.
While the 2018 session may amount to nothing more than “running out the clock,” Sen. Majority Leader Peter Wirth shed some light on his party’s plans for the future at the recent New Mexico Tax Research Institute conference when he said that “progressivity and more revenue are not dirty words.”
It seems very likely that Democrats’ plans include higher income taxes, specifically at higher income levels, and the concept of “revenue-neutrality” when it comes to taxes is not really a concern. A net income tax hike seems to be in the offing if Democrats take control.
Ironically, it was Democrat Gov. Bill Richardson who spurred the reduction of New Mexico’s top income tax rate from 8.2 percent down to the current rate of 4.9 percent. Now, as the Party has drifted leftward in New Mexico and nationally from the days of Bill Clinton, they seem poised to go the opposite direction.
Will Democrats offset higher income taxes with needed reductions to or reforms of the GRT? We can hope.
The future is never set in stone. We don’t know what will happen in the 2018 elections, but it does seem safe to say that no significant economic policy reforms are in the offing in 2018 and that Democrats expect favorable outcomes in the 2018 elections due to President Trump’s low poll numbers.
The last thing New Mexico needs is higher taxes levied on its most productive citizens. While Gov. Martinez has not always provided a strong, positive vision of a more economically-prosperous New Mexico, she has held the line against economically-harmful tax hikes. The days of relying on oil and gas and federal dollars to paper over poor fiscal policy and an unattractive business climate are over.
New Mexico deserves better. In the 2018 session we need a legislative session focused on policy reform, not political positioning.” Political interests shouldn’t be allowed to triumph over the public good, especially given the numerous and deep challenges facing our State.
Paul Gessing is president of the Rio Grande Foundation.