Parents are scrambling to find affordable child care. Our courts are so broke, judges are filing their own paperwork. Medicaid is teetering on the edge of a funding precipice the likes of which we have never seen. Legislative leaders are envisioning more budget cuts. In short, New Mexico’s necessary public services are in crisis.
So far, New Mexico’s answer to the recession has been to slash our investment in the very public institutions that make our modern economy possible. New revenue has been raised to avoid some cuts, but not nearly enough. Spending cuts lead to job losses, and job losses make the revenue picture worse. The recession has dropped us into a hole and we won’t stop digging. It’s time for a more balanced approach – one that includes a fairer, progressive tax structure and strong governmental accountability.
The “no new taxes” phrase is thrown about all the time. But if New Mexico actually acts on this worn-out platitude, it will make coming up with a realistic budget next year very difficult, if not impossible. Many legislators have lost their taste for slash-and-burn budgeting and will be looking for creative solutions to the continuing revenue rift. In short, they’ll be looking to close some tax loopholes.
In reality, this should not be a difficult task, given that Legislators have been boldly enacting tax breaks at a blistering pace in the last decade without a backward glance. In fact, according to recent analysis, the amount of money we’ve decided not to collect is almost equal to the amount of money we actually do collect.
We don’t actually know that tax breaks work
So why do we decide to not collect so much money? Often it’s because we think the tax break will encourage economic development. Problem is, we only think this. We don’t actually know this. That’s because once a tax break is enacted we move on. We don’t write. We don’t call. We don’t track how much it’s actually costing us (as opposed to how much we estimated it would cost us) and whether the state benefits or it’s just another special interest give-away.
Take, for example, our tax rate on purchasing a car. While the tax rate is a little over 6 percent on most of the things you buy, it’s just 3 percent when you buy a new car. Why is that? Maybe to encourage more people to buy new cars? Let’s see: Did you take that into consideration the last time you went out to buy a new car? Did you even know that the last time you went out to buy a new car?
Do you feel compelled to buy another new car now that you do know? Or are your car-buying decisions based on other criteria – like whether your current car is likely to leave you stranded somewhere or whether you can actually afford a new car?
The big question is this: Does this tax break do a darn thing for the state of New Mexico? The answer is a big, fat “we don’t know.” It’s also a big, fat $92 million hole in the state budget (according to the state Tax and Rev Department, which recently looked into this and other costly tax breaks). How many child care workers, court clerks and kids’ immunizations could we afford on $92 million? Lots.
Close the loophole for out-of-state corporations
When they meet again next January, legislators will have literally billions of dollars in tax holes they can consider closing. The first one they should consider is the out-of-state corporate profit tax loophole. This is the one that allows multi-state corporations to skip out on paying their fair share of income tax on the profits they make in New Mexico.
These are the same corporations, mind you, that pay nearly every one of our neighboring states income taxes on the profits they make in those states. Why do they get a free ride in New Mexico? Because we can afford to be so generous? Or because the corporate guys can afford so many lobbyists?
While you’re pondering that one, also give this some thought: Our tax system should be as transparent as our spending system. We need to know how much money we’re not collecting and if not collecting it is good for the state or not. If our tax system isn’t accountable, then we have no way of determining if it’s fair.
We also don’t know if necessary programs like child care, health care, and our courts could be spared from death by a thousand cuts. But we have our suspicions.
Tyrrell is executive director of the National Association of Social Workers’ New Mexico chapter. He authored this column on behalf of Better Choices New Mexico.