Tax and Budget

Tax-Funded Spaceport was never a Good Idea

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

Gessing and Webber pre-debate interview w/ Fred Martino on KRWG TV

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.

Right to Work: on the agenda for 2015 session?

In the wake of the Republican takeover of the New Mexico House, the talk has begun over whether or not the Legislature will seriously consider adopting a Right to Work law.

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.

Beer Industry Shows Economic Reforms Can Work

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.”

Local, National, Global: Paul Gessing interview on the NM economy

I recently sat down with Jamai Haquani of the Albuquerque-area public access show Local, National, Global to discuss New Mexico's struggling economy and what can be done about it. See part 1 of the interview below:

part 2:

part 3:

Right-to-work law and lower taxes will help more than subsidies

It's official. Tesla has broken ground at its new "gigafactory" near Reno, Nevada. While New Mexico appears to have missed out on Tesla and its expected 6,500 jobs, some legislators, when asked, seem willing to spend as much as 500 million tax dollars to lure the company to the state.

While details are by no means firm, it appears that Tesla is looking for an infusion of $500 million, not tax breaks of $500 million. The difference between the two is that tax breaks don't actually "cost" the state/taxpayers anything because Tesla would have to locate in New Mexico for any tax revenue to result from its activities. When it comes to outright spending of New Mexicans' tax dollars, those are dollars that come directly out of the pockets of average New Mexicans and the businesses already located here.

This important nuance explains why we at Rio Grande Foundation oppose payments made to the film industry which, according to a new legislative report, paid out $251 million in incentives to the film industry with $103.6 million in state and local tax dollars generated over the same basic time period. In simple mathematical terms, the state spent $147 million more than it generated from the film industry in recent years. That's called a "loss" in any other industry. Jobs were created, but the net loss really illustrates the inherent problems with the program.

The same reasoning explains why fiscal conservatives should not support outright spending of $500 million to bring in Tesla. Tax breaks are one thing, but if the company goes under, there are no "clawbacks" that will get $500 million in outright spending back.

Rio Grande Foundation to Host Bi-Weekly Radio Show on 770 KKOB AM

(Albuquerque, NM) — New Mexico’s only free market think tank, the Rio Grande Foundation, is hosting an hour-long radio show on 770 KKOB starting this Saturday, August 16, from noon to 1pm. The show will air every two weeks through at least the end of 2014. The show, entitled “New Mexico Freedom Hour” will focus on economic and education issues here in New Mexico with an eye towards real solutions that have been tried in other states. The format will involve interviews of guests from across the political spectrum and phone calls from the public. The call-in number is: 505-243-3333. Said Rio Grande Foundation president and primary host, Paul Gessing, “This show offers the listeners a unique forum in which to learn about and discuss the ways in which free markets and limited government can help everyday New Mexicans lead better lives. Show topics will include labor freedom, taxation, education reform, and an economic history of New Mexico to name just a few.

Unfair subsidies to businesses won’t help New Mexico’s economy recover

There is no question that New Mexico faces significant economic challenges. Our overreliance on Washington's largesse combined with business-unfriendly tax and regulatory structures have finally caught up with us. This has led to New Mexico bleeding jobs and people to other states, particularly our economically freer neighbors.

This has led to desperation among some quarters. Democrat Sens. Tim Keller and Jacob Candelaria seem to have even proposed a special legislative session for the sole purpose of offering subsidies and incentives to the Tesla car company. The hope is to attract a proposed battery factory to the state despite no concrete indicators from Tesla as to where they wish to locate said factory or what their criterion are.

Unfortunately, these Democrat legislators are not the only ones willing to engage in bad economic policies for a short-term political benefit in the form of "jobs." The Doña Ana County Commission recently voted 5-0 to grant an industrial revenue bond (IRB) to a Turkish wire company to encourage the company to come to Santa Teresa. While this financing mechanism is somewhat complicated as a means of giving special advantages to recipients, the basic effect of an IRB is that it exempts the recipient, for up to 30 years, from property taxes on land, buildings, the useful life of equipment purchased with bond proceeds and an exemption from applicable gross receipts taxes on the purchase of project equipment.

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