This op-ed ran in The (Farmington) Daily Times on March 1, 2015.
On January 1, 2005, food bought at New Mexico's grocery stores was excluded from the gross receipts tax, or GRT. In exchange for the break, the GRT was hiked on all other purchases.
A decade later, it's clear that the tax shift was a mistake.
With several proposals before the legislature to reinstate the GRT on food, it's time for an honest examination of how and why the well-meaning exemption failed.
Many of the state's liberal activists and organizations opposed ending the food tax. In 2003, New Mexico Voices for Children argued that the "very poorest people will not receive the benefits," because most "use food stamps, which are not subject to gross receipts taxes." (A staggering 21.5 percent of our citizens participate in the federal program.) In addition, many household essentials such as soap, paper products, and toothpaste remained taxable. Utility and motor-fuels taxes were not touched, either.
There have been so many things going on during the 2015 legislative session, that keeping up has been a real challenge. The interview below was done with Fred Martino of KRWG TV in Las Cruces at the beginning of the legislative session in January. A lot has happened since then, but the discussion remains extremely relevant.
Anti-tax, limited government activist Grover Norquist of Americans for Tax Reform recently visited New Mexico to speak to supporters of the Rio Grande Foundation. His remarks can be seen below:
A freedom outlook for New Mexico’s 2015 legislative session
Posted By Paul Gessing On January 20, 2015 @ 1:13 pm
By Paul Gessing | Watchdog Opinion
The 2014 elections represented nothing less than a seismic shift in New Mexico’s political system. Gov. Martinez won re-election handily, but the real story was the Republican takeover of the House of Representatives for the first time in 62 years.
For New Mexico, this political shift is nothing less than a once-in-a-lifetime opportunity to improve itself. New Mexico has traditionally struggled with high poverty rates, poor education levels, and an over-reliance on both federal spending and mercurial commodity prices, particularly oil and natural gas.
In recent years, oil and gas alone have generated 31 percent of New Mexico’s General Fund revenues. Also, according to data from the Mercatus Center, New Mexico topped the nation with 32 percent of its workforce occupied in public-sector and federal-contract jobs as a percentage of total jobs.
With federal employment stagnant, natural gas prices continuing to hover at historically-low levels and the recent collapse in oil and gas prices, policymakers in the Land of Enchantment face a dire need to jump-start the State’s weak private sector. An indicator of that weakness is that New Mexico is home to only one publicly-traded company headquarters, those of PNM, the State’s largest utility.
What is to be done?
For starters, the Legislature is going to be considering several labor reforms, most notably “right to work” legislation. Currently, 24 states have such laws on the books. These laws simply prohibit union membership or the payment of union dues as a condition of employment. Recently, “rust-belt” states of Indiana and Michigan have adopted similar laws.
The recent crash of Virgin Galactic’s SpaceShip2 in the Mojave Desert was a tragedy for the pilot that lost his life in the accident. It was also a setback for Richard Branson, Virgin Galactic, and the entire private space industry. However, for New Mexico taxpayers, it was only the latest and most vivid sign that building a Spaceport was not a wise use of tax dollars.
The transition from publicly-funded space travel (NASA) to a competitive, private-sector model was destined to be choppy and unpredictable. It is very much an open question how humans will travel safely and regularly into space in private spacecraft.
Even NASA with its multi-billion dollar budgets never quite figured out how to get humans back and forth form space routinely and regularly. The Space Shuttle was originally intended to launch as frequently as once a week. That didn’t come close to happening even in the best of times.
This all leads us to New Mexico where, at the behest of then Gov. Bill Richardson, our Legislature embarked our state upon a spaceport construction project at a cost to taxpayers of $220 million and counting.
A decade after this project was undertaken we have no idea what technologies will be used to fly people to space, whether companies can make space tourism profitable, and whether New Mexicans will benefit economically even if the space tourism industry succeeds.
Unfortunately, while Branson, Rutan, and other space pioneers are putting their own money and reputations on the line to make their space enterprises successful, the folks who unwisely got New Mexico into this mess cannot be held accountable and will suffer no personal losses from their actions.
Bill Richardson is not lying awake at night wondering if New Mexico’s Spaceport succeeds and I know of no legislator or other elected official who lost their race due to their unwise “investment” in the Spaceport.
This is where the Spaceport goes from isolated mistake to cautionary tale. The Spaceport has proven to be a spectacular failure in large part because the people behind it didn’t have any “skin” in the game. This lack of consequences leaves politicians to make decisions based on all manner of personal and political desires.
That is not to say that private sector entrepreneurs don’t fail. Indeed, if you know anything about Steve Jobs, he failed time and again as do most entrepreneurs. But they have their own money at stake and thus have the incentive to make better bets and only make bets they expect to succeed.
Just as governments should not kill businesses through high taxes and onerous regulations, government should not attempt to place bets using tax dollars on favored industries or technologies.
The Spaceport is only the most vivid failure of such government overreach in New Mexico, but we see the Rail Runner piling up ongoing losses and massive “balloon payments” due in the not-too-distant future.
The film industry which the economically-ignorant cite as a great success has actually lost $147 million for taxpayers since 2010 according to the New Mexico Legislature’s own study.
In recent years, taxpayers have also lost $16 million in subsidies for Schott Solar and $19 million Eclipse Aviation.
These wasted tax dollars could have been returned to real New Mexico entrepreneurs in the form of tax cuts to produce jobs and a real economic stimulus to our state. Instead, those scarce dollars have been – and in the cases of the Rail Runner and film subsidies – continue to reduce our prosperity by taking money out of entrepreneurs’ pockets and allocating it to less productive uses.
The good news is that Gov. Martinez doesn’t seem inclined to grandiose spending on spaceports and trains. Hopefully, New Mexicans have learned an important lesson about the promises of politicians and, rather than government micromanagement of our economy – a tendency that has led us to our impoverished state – will support government as referee, not coach.
Paul Gessing is the President of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility
Before our debate in Las Cruces (and thus before the election or the Virgin Galactic crash), I sat down to discuss the issues of the day with former Democratic gubernatorial candidate Alan Webber for a discussion with Fred Martino on KRWG's Newsmakers.
Our friends at the Heartland Institute have some excellent research and information on right to work and its potential impact on New Mexico (including research from RGF).
Lastly, I had a letter to the editor in the Albuquerque Journal's Business section on Monday which may have been missed amid all the election activity:
Letters to the Editor
Albuquerque Business Journal
In his column on right to work laws, Marshall Martin concludes that “there is little question having right to work may signify that a state is business friendly, one cannot be certain that having right to work is the deciding factor…”
That is a true enough statement. In the real world, “scientific” studies of economic systems don’t work. “Proof” that right to work is indeed good for the economy is as elusive as is “proof” that any law or system works.
What we do know is that eight out of 10 of the fastest growing states in 2013 were right to work. We also know that between 1977 and 2008, right to work states produced 44.5% more jobs and saw per-capita personal incomes grow 10% faster than states that do not have such laws in place.
Of course, right to work is not only an economic issue. It is a freedom issue. Workers shouldn’t have to join unions or pay union dues if they don’t want to.
It is true that no single economic policy change made by New Mexico’s Legislature is our ticket to prosperity, but a right to work law – which unlike most other “economic development” schemes won’t cost taxpayers a dime – is a good place to start.
So, the Legislature, whatever its partisan makeup, must embrace a variety of pro-market reforms if New Mexico’s economy is to be turned around, but right to work, a policy which according to Gallup is supported by 65% of Democrats nationally, is a great starting point.
They say that the definition of insanity is doing the same thing over and over again and expecting a different result. This link is to a spreadsheet illustrating political control of New Mexico's Legislature over the past 80+ years (since 1931). In summary, Democrats have controlled the House and Senate for a combined total of 160 years between the two bodies with Republicans having controlled one body or the other for a total of 6 years.
Clearly, given New Mexico's economic and education outcomes, liberal, big-government policies have failed. But what works? In a new opinion piece, Rio Grande Foundation president Paul Gessing discusses how reduced taxation on micro-breweries has led to a boom in micro-breweries in New Mexico:
It often seems that New Mexico’s economy is haunted by the ghost of Lew Wallace. Wallace, who also wrote Ben Hur, was territorial governor of New Mexico in the late 1800s. Wallace was apparently confounded by our State and was quoted as saying, “All calculations based on our experiences elsewhere fail in New Mexico.”
In dealing with New Mexico policymakers and the business community, Wallace’s attitude towards successful initiatives in the other 49 states seems to permeate discussions. Sure, they say, “Right to work states are generating jobs faster than forced-unionism states, but that doesn’t mean it will work here.”