The Roundhouse in Santa Fe (Photo by cjc4454/flickr.com)
When New Mexico was awash with cash, we gave the very wealthiest New Mexicans a 40 percent tax break. That was a bit extreme even at the time, but when surpluses are big, so is the pressure for tax cut
We looked the other way as out-of-state mega-corporations hid their money in tax havens, putting a relatively bigger tax burden on New Mexico companies.
Now that we’re running a major deficit, the millionaire tax breaks and corporate-loophole fiesta has to end. We need some sanity and common sense when it comes to balancing our budget.
The governor’s approach is preferable to some of those being floated in the Senate, because he understands that a one-dimensional approach of cuts, layoffs and furloughs will cripple New Mexico’s economic recovery.
Here are three common sense ideas — including cuts — to save money and raise revenue without slowing the recovery.
Commonsense cuts
One of the favorite claims of proponents of a cuts-only solution is that the state and our schools are too bloated. They have a point (albeit a limited one), and it deserves attention.
Carter Bundy
While the state of New Mexico has grown by almost 10 percent this decade, the number of classified state employees has been virtually static. That means we have about 10 percent fewer state employees per capita than we did during the era of anti-government, anti-education, anti-health care, anti-infrastructure, anti-public safety Gov. Gary Johnson.
(In fairness, Gary isn’t against everything. He seems to enjoy extreme sports, Van Halen, and pot. Wait — did we really elect Jeff Spicoli from Ridgemont High to be our governor? Twice? )
The fact that classified state employees are leaner than they have been in decades — since before Governor Spicoli — doesn’t mean there aren’t commonsense ways to make government better.
The state is more top-heavy than it used to be, and perhaps we should be pursuing incentives like early retirement. At the very least we should eliminate double dipping, which is a drain on both the general fund and PERA.
Double dipping also incents the large upper management pool to stick around for longer than they otherwise would. Thinning upper management by banning double dipping and offering early retirement is a commonsense way to make all of state government as lean as the classified ranks.
Likewise, our schools could use more teachers and smaller administrative ranks. Class sizes are ballooning all over New Mexico.
Anyone who thinks that there’s no impact on the ability of a kid to learn in a class of 40 instead of 25 simply has never spent time in a classroom. So find ways to make administration leaner, but don’t cut classroom funding.
Smart, targeted tax policies
Administrative slimming gets us part of the way toward a balanced budget. Beyond that, how do we ensure that as the national economy picks up, New Mexico’s economy improves as well to close the rest of the deficit?
One solution that doesn’t hamper recovery is to rescind a portion of the 40 percent tax cuts given out when times were good. When millionaires pay slightly higher taxes, that money doesn’t come out of consumption. Their children may luck into a fractionally smaller inheritance years from now, but that’s about it.
But consumption? Not hurt. It’s a pretty big stretch to say that someone pulling in a million dollars a year is going to skimp on, say, granite counters or groceries or $9 movie tickets.
Contrast that with what happens when we balance the budget on the backs of middle class workers. The average state classified employee salary is about $30,000/year. Ask any person making $30,000 a year what happens to their family budget if you take away $2,000.
Middle class workers will have to cut consumption, period. No movies, no Applebee’s, no Chili’s, fewer groceries, fewer clothes and other retail spending. They’ll cut cable, stop shopping at Coronado, Uptown and Cottonwood, and put off bigger ticket purchases that their families need and that our businesses rely on.
If our focus is on economic recovery and on helping businesses, we want middle-class workers to have more money in their pockets. We shouldn’t worry terribly about a tiny hit to millionaires.
Level the playing field
We have a heck of a negative business environment when we tell New Mexico companies that they have to pay their taxes while the big boys from California, New York, Arkansas, and foreign countries cleverly shelter themselves from having to pay their fair share. It hurts the budget and puts our home-grown companies at a distinct disadvantage.
Fortunately, there’s a solution: combined reporting.
All combined reporting does is make sure that the tax avoidance loopholes that mega-corporation lawyers exploit are closed. That’s it. If New Mexico businesses have to pay, why don’t their competitors?
Does anyone think Wal-Mart will pull out of New Mexico if they have to pay their fair share of taxes? As if Wal-Mart is a big help with their $9/hour, no-health-care, no-retirement jobs anyhow.
OK, suppose you like Wal-Mart. Every other state in the West other than Oklahoma uses combined reporting, and anyone who has traveled the West can tell you there’s no shortage of Wal-Marts.
The out-of-state corporations’ lobbyists will cry that the sky is falling, but have you ever noticed how their scary scenarios never come true, whether they’re fighting against child labor laws, environmental responsibility or fair tax policy?
There it is. New Mexico can stay afloat without crushing the middle class or stifling our recovery with three simple, proven solutions that have been used by dozens of other states. A win for common sense and sanity.
Bundy is the political and legislative director for AFSCME in New Mexico. The opinions in his column are personal and do not necessarily reflect any official AFSCME position. You can learn more about him by clicking here. Contact him at carterbundy@yahoo.com.