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Tax Bills Could Affect Future of NM Economy

Illustration of what Single Sales Factor could mean to the New Mexico state budget.GRAPHIC: Courtesy of New Mexico Voices for Children
Illustration of what Single Sales Factor could mean to the New Mexico state budget.
GRAPHIC: Courtesy of New Mexico Voices for Children
March 1, 2013

SANTA FE, N.M. – Saturday could turn into a pivotal day for New Mexicans.

It's the day when as many as eight different Senate tax bills will make appearances in the Senate Corporations Committee.

And according to Bill Jordan, policy director of New Mexico Voices for Children, at least five of those bills would change the formula by which corporate income taxes are calculated.

Jordan says Gov. Susana Martinez' tax proposal would drop the corporate tax rate from 7.6 to 4.9 percent. It would also adopt what's called the "Single Sales Factor Formula," which only considers in-state sales.

"If we did both of those, it would cost $255 million in revenue,” he says. “I call that the nuclear option because it basically blows up the state budget."

Supporters say the plan is good for economic development. But Jordan says New Mexico does not have $255 million in new revenue this year, so the governor's proposal would require major cuts in education, public safety and many other areas.

Charles Bowyer, executive director of the National Education Association of New Mexico, says the argument that tax breaks for corporations improve economic development is one that puts money into the wrong hands.

"If you believe you have some revenues that you could devote to economic development,” he says, “they'd be much better off placed in public schools, so they'd flow to every community in New Mexico than it would be granting a tax break to a large corporation."

Jordan says some of the bills are revenue neutral, but most of the bills will cut revenue.

With the state having the highest rate of income inequality in the nation and a fragile economy, one bill that Jordan sees as positive is one to boost the working families tax credit to 15 percent of the federal Earned Income Tax Credit.

"That would pump a lot of money into our economy by giving it back in a rebate to low and middle-income families with children," he says.

Jordan also notes the possible impact of broad federal budget cuts, known as sequestration.

"It would mean even less revenue next year, even less tax collections because of lost jobs," he says.

Jordan adds New Mexico's tax structure looks like Swiss cheese with a lot of holes in it where the state has created incentives. He says changing the rate and the formula for corporate income taxes is a drastic move that would cost the state more than half of its corporate income tax revenue.

Renee Blake, Public News Service - NM