Errors of Enchantment

Regardless of how you feel about the results of the recent election, it would seem that taxpayers of all stripes should be concerned that government officials are able to tilt the balance of ballot elections by using tax money to advertise on behalf of those ballot measures. Opponents of higher taxes, like the Rio Grande Foundation, must rely on donated funds and are given no free resources or media platform to argue against these tax hikes and bond measures.

I wrote about this problem in this week's edition of The Taos News.

Posted by Paul Gessing at 10:05 AM | Permalink | Comments (0) | TrackBacks (0)

I appeared on Channel 7 News last night on the 10pm broadcast to discuss reasons why voters should oppose the 1/8th cent tax hike to fund a portion of the Rail Runner's operation costs and some new bus service. An article on the tax hike is available here. Not sure when/if video will be posted on their site. I believe that the vote will be quite close.

Posted by Paul Gessing at 03:29 PM | Permalink | Comments (0) | TrackBacks (0)

Still wondering what to think of the myriad ballot measures on the ballot this Election Day? Check out this article which discusses the measure and the concept of raising taxes in the current economic downturn. The article appeared in both the New Mexico Free Press and the Roswell Daily Record.

Posted by Paul Gessing at 03:41 PM | Permalink | Comments (0) | TrackBacks (0)

Check out the video from Sunday's episode of Eye on New Mexico in which I debate the merits of raising the Gross Receipts Tax in Bernalillo, Sandoval, and Valencia Counties to fund the Rail Runner and some other transit projects.

Speaking of the Rail Runner and other tax hikes on the ballot this fall, why is it that governments are clearly spending your taxpayer dollars to fund public campaigns to convince voters to raise their taxes.

Check out the Rail Runner's campaign site. You've probably already seen their tv ads. It seems that all of the measures on the ballot this fall have their own government-financed campaigns behind them. It would seem that all voters should get behind some kind of effort to prohibit the spending of taxpayer money to ask for more taxpayer money...

Posted by Paul Gessing at 09:32 PM | Permalink | Comments (0) | TrackBacks (0)

Otero County residents are voting on whether or not to increase the County gross receipts tax rate in order to build the spaceport hundreds of miles away near Truth or Consequences. I argued recently in the Alamogordo Daily News that voters should be wary about voting for higher taxes due to the unique nature of the gross receipts tax and the fact that this particular tax hike will be far more costly than 1/8th cent.

Posted by Paul Gessing at 12:30 PM | Permalink | Comments (0) | TrackBacks (0)

In case you missed it, a few weeks ago I appeared on Bob Clark's show on KKOB 770 to discuss the Rail Runner tax hike. A link to the show can be found here.

Posted by Paul Gessing at 10:32 AM | Permalink | Comments (0) | TrackBacks (0)

A few weeks ago I posted information on some of the ballot measures that will appear on New Mexicans' ballots this fall. Not all of the information was available at the time, but at last, the Secretary of State's office has put sample ballots online. Ballots statewide are available here and are listed by county. They are long and have a lot of important races and ballot measures on them, so I recommend you look at them early and figure out your votes ahead of time.

At last, complete text of the Rail Runner tax hike is available. The Bernalillo County language is as follows: Shall Bernalillo County impose a one-eighth of one-percent gross receipts tax which shall be dedicated to the Rio Metro Regional Transit District in equal portions for the purpose of management, operations, capital planning, construction or maintenance of the New Mexico Rail Runner Express, and for the management, operations, capital, planning construction or maintenance of the Rio Metro Regional Transit District System, pursuant to the Regional Transit District Act?

Posted by Paul Gessing at 09:21 AM | Permalink | Comments (0) | TrackBacks (0)

Micha Gisser is a former UNM professor and currently serves as a Senior Fellow with the Rio Grande Foundation. He had a very interesting article (subscription required) on taxes in the Business Journal section of the newspaper recently. Gisser essentially went through the tax cutting successes and failures of the last three Presidents to have cut taxes significantly -- JFK, Reagan, and George W. Bush and discussed their impact on the overall economy. I have previously compared the size and scope of these tax cuts here.

To sum up his arguments, Kennedy's tax cuts were Keynesian in nature with the top income tax rate dropped from 91 percent to 70 percent and they succeeded in reducing unemployment from 5.7 percent to 3.8 percent while the deficit was actually reduced at the same time.

Gisser goes on to discuss Reagan's tax cuts which included reducing the top income tax rate from 70 percent to 28 percent. He calls the record of these cuts "mixed" because budget deficit increased dramatically under Reagan. Where I disagree with Gisser is that the deficit and tax cuts are separate matters. The deficits under Reagan were at least partly spending induced as this chart shows.

Lastly, there is Bush whose capital gains tax cuts in particular Gisser calls a success. Although Gisser gives Bush an undeserved pass on his spending (see previous chart), it is important to recognize at a time when Bush's economic policies are increasingly unpopular that his tax cutting policies are not to blame. Rather than raising taxes as Obama proposes, we should make the Bush tax cuts permanent and look for ways to reduce our corporate tax burden which is among the heaviest in the world.

Overall, Gisser makes a compelling case, but rather than saying that a particular tax cut has a "mixed record," we should look at cutting taxes as a way to shrink government. Ultimately, that should be the goal.

Posted by Paul Gessing at 10:49 AM | Permalink | Comments (0) | TrackBacks (0)

No, I’m not going to tell you who to vote for. Candidates are human beings, likely to shift positions with little notice and once entrenched, it is darn near impossible to get rid of them. Besides, we could run into trouble with the IRS.

That said, there are plenty of ballot issues on the November ballot that may be getting lost in the shuffle, what, with all the attention focused on the Presidential, Senate, and House races (not to mention legislative races) statewide.

While ballots may vary locally, here are some of the proposed ballot measures and what they will do along with some thoughts about how believers in free markets and individual liberty might respond.

Constitutional Amendments

CA 1 Increase the size of certain school boards to nine members and conduct elections by mail-in ballot.
Proponents argue that increasing the size of the school board will somehow improve their administration, but it would seem that it is a half-hearted attempt at best. Allowing choice and forcing schools to compete for students would be more effective.

CA 2 Allow midterm salary increases for county officers.
Do we really need to pay bureaucrats any more than we already do?

CA 3 (2008) Require confirmation of heads of cabinet-level departments or agencies who are subject to senate confirmation at the beginning of each term of a governor.
This is largely irrelevant because the Senate will more than likely act as a rubber stamp. True accountability only comes with greater transparency.

CA 4 (2008) Allow school elections to be held with other non-partisan elections.
Yes! Giving a broader swath of voters the ability to vote on school elections, especially bond measures and tax increases will prevent education bureaucrats from monopolizing low-turnout votes. Also, holding all of these additional elections costs taxpayers’ money.

CA 5 (2008) Require the governor to fill a vacancy in the lieutenant governor’s office by appointment, with consent of the senate.
Like amendment three, this amendment will have very little impact.

Ballot Measures

Measure A: Should the state issue $14,725,000 of debt to build additional senior centers?

Measure D: Should the state issue $140,133,000 in debt to build higher education facilities? This ballot measure explicitly provides for property tax increases to pay for the debt on these bonds.

Believers in limited government and free markets should vote against ballot measures because they represent deferred tax increases and result in an inevitable expansion of government. This article provides some insights as to why voters would want to vote “no” on bond measures.

There is yet another issue on many New Mexico voters' ballots (voters in Bernalillo, Sandoval, Valencia, Santa Fe, Los Alamos, Rio Arriba and Taos counties) this November, that is the 1/8th cent tax hike to pay for the Rail Runner commuter rail project and some other transportation projects. Believe it or not, no one has the exact language for it (or at least they won't give it to me). Needless to say, we at the Rio Grande Foundation have been longtime critics of the Rail Runner and can't imagine anyone who believes in limited government would vote for such a project, particularly since it is nearly completed already and won't be abandoned if the tax hike is defeated.

Watch this space for specific ballot language.

Posted by Paul Gessing at 03:08 PM | Permalink | Comments (0) | TrackBacks (0)

It never ceases to amaze me when voters choose to tax themselves more. This is particularly true when the economy is on the rocks. I'd recently written about just such a tax hike issue on the ballot in Carlsbad where voters chose just yesterday to levy a half-cent hike in the gross receipts tax.

Although voters misguidedly chose to increase their tax burden, the Rio Grande spurred an interesting debate with letters to the editor and opinion articles here, here, here, and here placed in the Current-Argus.

We'll follow Carlsbad closely to see how this major tax hike impacts Carlsbad's economy and in our next tax friendliness study we'll note how the hike impacts Carlsbad's tax burden relative to other cities around the state.

Posted by Paul Gessing at 02:41 PM | Permalink | Comments (0) | TrackBacks (0)

Sorry to ignore the blog for a few days. I was at the annual State Policy Network conference in Scottsdale with hundreds of other think tank leaders. We exchanged ideas and generally worked to help each other create a more effective free market movement nationwide.

My posting for today is simply this very telling chart which clearly shows how Santa Fe's gross receipts tax has risen dramatically over the years. As we've pointed out previously, the gross receipts tax is devastating to New Mexico's economy because it most hurts the very businesses that generate jobs and wealth in our economy. Having jumped from 4.25 percent back in 1980 to nearly 8 percent this year and perhaps over 8 percent this fall if voters pass the Rail Runner tax, the gross receipts tax will continue to do untold harm to City and State economies.

Posted by Paul Gessing at 03:38 PM | Permalink | Comments (0) | TrackBacks (0)

I was away for the Labor Day Holiday this weekend and was without internet access and thus not blogging. Summer has reached its unofficial end, so we are back to work and back to blogging.

Last week I weighed in on a tax increase that voters in Carlsbad will face in just a few weeks. This is no minor tax hike, rather it is a 0.5 percent increase in the gross receipts tax rate, an increase from the current rate of 6.8125 percent rate now in place to 7.3125 percent. The money is supposedly needed to pay for repairs to the municipal water system.

The Rio Grande Foundation had previously ranked Carlsbad as the most taxpayer-friendly city in New Mexico, but if this tax hike is passed, that status will undoubtedly be jeopardized. More importantly, as I point out in an op-ed regarding the tax hike, Carlsbad might avoid the tax hike entirely by privatizing its water services. The article was picked up by Len Gilroy on his Reason blog.

Posted by Paul Gessing at 03:48 PM | Permalink | Comments (0) | TrackBacks (0)

The special session ended with a whimper instead of a bang this week. This means that the career of one of New Mexico's staunchest conservatives ended as well. While Rep. Foley certainly made enemies among Democrats and some conservatives (enough to unseat him in a primary earlier this year), he also had the courage to fight for free market, conservative principles that we at the Rio Grande Foundation hold dear.

In fact, Foley laid out a model for Republican success as an opposition party (and potential majority party) during the special. He introduced a little-publicized bill, House Bill 12, that would have eliminated New Mexico's personal income tax by 2012. While the Governor's "rebate" plan was an embarrassment both as public policy and ultimately, politically, Foley laid out a clear vision for a better New Mexico. I might add that Foley relied on intellectual arguments (and data) from the Rio Grande Foundation in putting together his bill.

Hopefully, since Rep. Foley will not be returning to Santa Fe in January, someone in the Legislature steps forward to put ideas like fundamental tax reform on the table in the New Mexico Legislature. Thanks Dan.

Posted by Paul Gessing at 01:53 PM | Permalink | Comments (0) | TrackBacks (0)

I have publicly supported Governor Richardson's plan to use this special session to give tax rebates to New Mexicans. Under the Governor's original plan:

New Mexico families would receive an income tax rebate from the state of between $150 and $75. Those with family incomes below $60,000 and no children would receive $150 while families making more than $70,000 would receive $75. Having children would result in additional refunds, with lower-income taxpayers receiving more than higher earners.

As I pointed out, this was less-than-optimal because it actively penalized those who make more money, but since everyone got a rebate it was still a good plan.

Unfortunately, under the Governor's revised plan which was outlined in today's Albuquerque Journal(subscription required), the Governor, in response to revised oil and gas revenue numbers, has decided that no taxpayers with family incomes above $80,000 are deserving of a rebate.

There's nothing at all wrong with giving rebates to all taxpayers -- in fact we encourage it -- but the idea that families who make more than $80,000 (upper-middle class, but by no means wealthy) and pay higher taxes, is absurd. In fact, this transforms an otherwise viable rebate plan into nothing more than another welfare program.

Unless the rebate plan is revised in order to include all taxpayers, we'd be better off if legislators simply went home right away and the special session was aborted before it got off the ground.

Posted by Paul Gessing at 10:15 AM | Permalink | Comments (0) | TrackBacks (0)

Massachusetts developed a bad reputation as "Taxachusetts" back in the 1980s. This November, voters in that state will have be voting to completely eliminate that state's 5.3% income and wage tax, as well as the state capital gains tax, which reaches as high as 12%. The ballot initiative would replace the $12.5 billion in taxes with . . . nothing.

As the Wall Street Journal points out:

The referendum may seem the longest of long shots in a state represented by some of Congress's biggest spenders. But the same initiative was on the ballot in 2002, and though the political establishment roared with laughter through Election Day, the measure got 45% of the vote. This time pro-tax forces such as the Massachusetts Teachers Association are planning to spend millions of dollars warning of Armageddon.

As I discussed in our recent policy paper, New Mexicans would be wise to consider following Massachusetts by seriously considering elimination of the personal income tax. It would be great if New Mexico had the initiative process which has allowed citizens of Massachusetts to put this issue on the ballot, but we don't. That said, it is my understanding that legislation will be introduced in the Special Session (which begins next week) to phase New Mexico's personal income tax out.

Posted by Paul Gessing at 10:21 AM | Permalink | Comments (0) | TrackBacks (0)

Residents of Santa Fe will vote next spring whether or not to impose higher taxes. According to the New Mexican, the tax would work as follows:

When a house is sold for more than $750,000, the buyer would be responsible for paying a fee that represents 1 percent of any amount over $750,000. For example, a house sold for $800,000 would owe $500. Revenue would go to the city's Affordable Housing Trust Fund and would be earmarked to help increase home ownership among the city's work force and for other housing needs.

Supporters claim the tax is needed to curb the economic and social consequences of the migration of the city's workers to less-expensive nearby communities while earning wages in Santa Fe. In other words, Santa Fe is too expensive for many middle-income people to live in.

Of course, at a time when politicians are hoping to raise taxes, the fact that Santa Fe's tax burden has gone up dramatically in recent years is conveniently ignored.

Residents of Santa Fe have seen their gross receipts rates climb more than 25 percent from 6.3125 percent back in 1999 to the current rate of 7.9375 percent. Of course, property taxes and hotel taxes have also risen in the last several years.

This doesn't even address the impact of the proposed real estate transfer tax. Thankfully, the Texas Association of Realtors has done a useful analysis of the negative economic impact of real estate transfer taxes. The vote isn't until March, but look for more on this from the Rio Grande Foundation.

Posted by Paul Gessing at 12:57 PM | Permalink | Comments (0) | TrackBacks (0)

The Rio Grande Foundation recently made the case for eliminating New Mexico's personal income tax. While the study received a great deal of attention throughout New Mexico, recently the study has received attention around the nation.

The Georgia Public Policy Foundation included a link to our study in that organization's "Friday Facts" memo. Also, the Tax Foundation, one of the oldest think tanks in Washington, recently cited the RGF study on its Tax Policy blog.

Glad to see that people in other states recognize a good idea (eliminating the income tax) when they see one. Hopefully, New Mexico policymakers understand the need to stimulate the economy in a more substantial way than Congress's "stimulus" effort.

Posted by Paul Gessing at 11:59 AM | Permalink | Comments (1) | TrackBacks (0)

Housing in Santa Fe could get even more expensive if voters in the City approve a new real estate transfer tax. With a majority of Councilors having expressed support for the plan, a special election Aug. 19 to decide the matter is inevitable.

The plan which would levy a 1 percent fee on homes that sell for more than $650,000 would generate about $1.8 million each year for the city to help the city subsidize housing for police officers, firefighters, nurses, teachers and other essential workers. While these workers are by and large a sympathetic group, the idea of further taxing certain real estate in order to subsidize the cost of owning a home for other people is rather absurd.

Rather than forcing real estate prices up in order to drive them down, Santa Feans should repeal some of the absurd regulations (toilets, zoning/housing restrictions, and property tax hikes that have driven costs higher and higher.

Rather than raising taxes, Santa Fe's political leadership and voters should consider reducing some of the more costly restrictions on housing in Santa Fe. This will certainly be a point of discussion leading up to the August 19 election.

Posted by Paul Gessing at 04:14 PM | Permalink | Comments (0) | TrackBacks (0)

Santa Fe County Commissioner Jack Sullivan was fighting the majority, according to The New Mexican (Official fights planned tax hike, Apr. 29, 2008), when he proposed that Santa Fe County drop out of the Transit District, which includes Santa Fe, Taos, Los Alamos, and Rio Arriba counties. The Transit District is trying to impose a tax increase on residents to expand bus services in these counties.

The only problem is that the state legislature, through the Department of Transportation, is considering imposing its own tax for Rail Runner services. The Transit District doesn’t know where Rail Runner routes are going to connect yet. They have no clue where bus service might be needed most. A week ago the Transit District, even though it didn’t have the details of Rail Runner service, wanted to impose a tax increase anyway. Thankfully Jack Sullivan was able to persuade Santa Fe County Commissioners to hold off until they were able to talk to the state about plans for the train. Sullivan said, “Details about how Santa Fe’s approximately $4.5 million portion in tax revenue would be spent are vague.” It’s possible that the state would impose a tax for some of the same services the Transit District wanted to tax for.

Some officials didn’t think double taxation was a big deal. Transit Board director Josette Lucero said, “We’ve already gone back to the drawing board twice.” Santa Fe City Councilor Miguel Chavez said, “We’ve already reconsidered…it seems a little redundant.” County Commissioner Mike Anaya said, ‘Sullivan needs to take a longer view of the issue and not get bogged down worrying about which county pays for what.’ (The New Mexican, 4/29). Details are so messy when you are trying to pick peoples’ pockets!

Then, after the Commission’s April 29th meeting, at which Sullivan was able to convince commissioners to wait for more details from the state’s Department of Transportation before agreeing to the Transit District’s tax, Board director Lucero said, “I can totally understand their position…I agree that the parties needed to come together months ago.” Santa Fe Mayor David Cross said, “We’re just not ready. We don’t have a plan for public transit that includes the Rail Runner…I would like to see that addressed as part of the equation…” (The New Mexican, County agrees to put hold on tax increase, Apr. 30, 2008) The Transit Board director is only going to participate in a task force if they can come to a resolution within 30 days, after which Sullivan will reintroduce the idea of Santa Fe County dropping out of the Transit District.

Why isn’t possible double taxation a big deal for the Transit District? Why haven’t the counties and state been collaborating on transit? Why is the Transit Board director putting a timeline on researching the impacts of the tax? It’s obvious that some of these people aren’t concerned with wasting our money. Other than Sullivan, many of these officials seem to have no problem flushing our money down the toilet.

Posted by Corey Davis at 12:18 PM | Permalink | Comments (0) | TrackBacks (0)

Jim Scarantino wrote about the FairTax recently in The Alibi. While I did not really disagree with anything that Jim said, I think free market conservatives and libertarians are misplacing their energies by focusing on tax reform. The letter which was published in the most recent edition of The Alibi

I read Jim Scarantino’s article on “The Fair Tax” [Re: The Real Side, April 17-23] with great interest. I spent nearly eight years in Washington working on tax reform and advocating for taxpayers. Like Jim, I believe America’s tax system is broken. Unfortunately, the political will to seriously reform or abolish our income tax system is sorely lacking in Washington.

The problem is that each loophole and tax shelter now written into the Tax Code was put there because a powerful interest group successfully lobbied to put it there. The home-owners tax deduction is just one popular provision that, rightly or wrongly, will be extremely tough to eliminate in the name of tax simplification.

As if entrenched special interests were not enough of a problem with any fundamental tax reform, the Fair Tax faces the additional obstacle of being untested. On the other hand, more than 20 nations, especially rapidly growing states of the former Soviet Union, have adopted flat taxes. It might work, but making the leap will be a serious challenge.

Rather than focusing on reforming how we collect taxes, we instead need a philosophical shift away from the belief that government is a tool by which one person can live at the expense of others. Indeed, government can insure our lives, liberty and property, but redistributive government policies inevitably destroy wealth rather than produce it.

Simplifying the Tax Code is a good idea, but until we change our view of government, such reforms will remain a distant dream.

Paul J. Gessing
President, Rio Grande Foundation
Albuquerque

Posted by Paul Gessing at 05:09 PM | Permalink | Comments (1) | TrackBacks (0)

While most economists understand the economic benefit of reducing or eliminating income taxes, not many states have real-world data to show how income tax cuts would impact their own economies. New Mexico, however, is one state with recent experience with significant income tax cuts. Between 2003 and 2008, New Mexico reduced its top personal income tax rate from 8.2 percent to 4.9 percent. Not surprisingly, during that same time period, New Mexico's average personal income level rose from 47th in the nation to 43rd after having been stuck at 47th in the nation for several years.

The Rio Grande Foundation's new paper outlines a plan to eliminate the state's personal income tax entirely within four years by simply holding spending growth to 4.5 percent annually. Since the 9 states lacking an income tax have personal incomes averaging $7,000 more per year than New Mexico, eliminating the personal income tax would conceivably push the state out of the tier of poor states and push it up to the middle of the pack.

Posted by Paul Gessing at 10:08 AM | Permalink | Comments (1) | TrackBacks (0)

We at the Rio Grande Foundation have written a good deal about the proposed New Mexico Spaceport. Now, the new director of the Spaceport, Steve Landeene, is making the pitch for "tax hikes for billionaires" to justifiably-skeptical voters in Sierra County.

Landeene argued before the Sierra County Commission that the 1/4-cent gross receipts sales tax hike which will be on the ballot on April 22 is "the key to unleashing world history right here in Sierra County." He went on to claim that "one study estimated the spaceport would generate $1 billion in economic development and 2,250 jobs within the first five years of operation."

Of course, the question Landeene didn't answer is why Sierra County residents should be asked to pay higher taxes -- on top of an already-onerous 7.25% gross receipts tax rate -- in order to pay for millionaires and others to go into space? If this project is really going to generate $1 billion, shouldn't the investors be able to afford to build the Spaceport themselves?

Posted by Paul Gessing at 11:40 AM | Permalink | Comments (0) | TrackBacks (0)

For some, taxes and government regulations are the first and favored tool for moral betterment. This reflex is made abundantly clear by the Rio Grande Chapter of the Sierra Club here in New Mexico and a coalition called "Leave No Child Inside" which is pushing a 1 percent tax on TVs, video games and video game equipment. Legislation has been sponsored by Representative Gail Chasey (D-Bernalillo).

Proponents of the tax would like the money to be dedicated to The fund would help pay for outdoor education throughout the state. Of course, taxing video games to fund outdoor education sounds great to the average do-gooder. Video games and television are politically correct and they make us fat. Who could be against taxing such harmful products?

Well, I'm no lover of video games and I do like the outdoors, but I don't like getting government involved. Besides, in case you haven't noticed, senior citizens around the country are now using video games to stay physically fit. Are we really going to make it harder for senior citizens, most of whom can't hike around in the mountains, to get in shape at their own pace?

The fact is that governments should not be in the business of molding us into better people. Governments should leave smokers, fat people, couch potatoes, and others alone.

Posted by Paul Gessing at 03:15 PM | Permalink | Comments (0) | TrackBacks (0)

Bernalillo County will be lobbying the Legislature during the 2008 session for the ability to raise property taxes on County residents. Leaving aside whether it is proper for our elected representatives to use our tax money to further increase our taxes, this request, if fulfilled, will inevitably result in higher taxes, no matter what the County Commission might say.

Ostensibly, the increase is "necessary" to fund the jail and there are major problems with who places people in the jail and whether or not they are financially responsible for them. But, those problems should be addressed before the County simply sticks its hands further into taxpayers' pockets.

Perhaps the most troubling aspect of the article in today's Tribune is the expressed willingness of some of our political leaders to increase the gross receipts tax in lieu of the property tax. The gross receipts tax is simply the worst, most economically-destructive form of taxation here in New Mexico and further increasing it would hurt the Bernalillo County economy.

Posted by Paul Gessing at 09:07 AM | Permalink | Comments (0) | TrackBacks (0)

When one person says something it is can often be dismissed as a simple statement of their opinion. When two people make the exact same statement and they happen to both be state legislators who are intimately involved in setting transportation policies in New Mexico, it becomes a talking point.

This became apparent recently as I have listened to both Rep. Patricia Lundstrom, Vice Chair of the House Transportation Committee, and Sen. Diane Snyder of the Senate's Transportation Committee, argue that on a national basis, gas taxes and gas prices are not correlated. The argument would then presumably follow that if raising the gas tax doesn't increase prices at the pump, then New Mexico should increase its gas tax to resolve the its Railrunner-induced transportation crisis.

Of course, as anyone who understands basic economics would know, the legislators' argument does not hold water. First and foremost, with 20 different gasoline formulations imposed by the federal government, clearly we are not dealing with one national market, but many separate markets for gasoline. Also, geography is important.

Not surprisingly, relatively isolated states like Hawaii and Alaska (despite low tax rates and the presence of oil), increase the price of gas. In fact, Hawaii is the most expensive and Alaska is second-highest right now.

In reality, despite the formulary issue, once you factor in geography, gas taxes do indeed seem to correlate with higher prices at the pump. An updated list of gas prices is maintained by AAA and a list of states and their gas taxes can be found here.

Not surprisingly, gas in Washington, with its 34 cent gas tax is about a dime more costly than gas in Oregon with its 24 cent per gallon tax. While prices at the pump in New Mexico trend somewhat higher than nearby states with the same tax rate, this is more likely a factor of having a relatively sparse population (see Montana as an example) than other factors.

Undoubtedly, pricing gas across state lines is not a perfect science, but I can assure you that if New Mexico increases its gas tax, prices at the pump will increase by a corresponding amount.

Posted by Paul Gessing at 10:34 AM | Permalink | Comments (0) | TrackBacks (0)

Michael New, a professor from the University of Alabama and an expert on tax and spending limits testified with me before the Legislative Finance Committee recently. An article by Dr. New recently appeared in the Las Cruces Sun-News making the case for Constitutional limits on taxes and spending in New Mexico.

Posted by Paul Gessing at 06:11 PM | Permalink | Comments (0) | TrackBacks (0)

According to the Tax Foundation's exhaustive analysis of business taxes nationwide, New Mexico, the state ranks in the middle of the pack (23rd overall). There is a lot of great information and analysis in the paper, but the following quote summarizes the study's findings with regard to New Mexico:

New Mexico has improved several aspects of its tax system in recent years, most advantageously cutting the top income tax rate, with the result that its sales tax system is practically the only thing dragging its overall ranking down to a middle-of-the-pack ranking of 23rd best. Although the almost 6% rate (when including local add-ons) is not excessive, its application to business-to-business transactions is among the most extensive in the nation. This results in several layers of sales taxation, which distorts the economy against sectors that rely on multiple stages of production to bring their products to market.

I have a few quibbles with even this quote, however. First and foremost, the reason we have such an all-encompassing sales tax is that we have a gross receipts tax with lots of exemptions written in. The analysis contained in the paper is correct, but New Mexicans call the tax "gross receipts," not "sales." More importantly, few places in New Mexico have sub-six percent gross receipts tax rates. In fact, the statewide average is 6.65 percent and the average rate of New Mexico's 10 largest cities is in excess of 7 percent. Clearly, the gross receipts tax is an even bigger problem than the Tax Foundation's report lets on.

New Mexico has improved somewhat in recent years, but we still have a long way to go. Reforming the GRT is a must for the economic future of the state.

Posted by Paul Gessing at 03:30 PM | Permalink | Comments (0) | TrackBacks (0)

Impact fees... to advocates they are a means of "generating revenue for funding or recouping the costs of capital improvements or facility expansions necessitated by and attributable to the new development ." To detractors, they are just another way for government to reach into taxpayers' pockets. From the Foundation's perspective, it would be nice if an actual marketplace for roads, schools, and other services now provided by the government existed because people would actually pay for what they use, not what government bureaucrats tell them they've used.

Regardless of their merits, however, according to a new Harvard study outlined here, there is no doubt that impact fees have a negative impact on housing affordability.

Among the study's findings:

Each $1,000 increase in the cost of a new median-priced home forces 217,000 prospective buyers out of the marketplace;

Every $819 rise in fees paid at the beginning of the construction process--such as an increase in the price of a construction permit, a tap fee, a proffer or an impact fee--adds an additional $1,000 to the final price of the home;

Developers pay an average of $3,114 more than it cost for basic infrastructure and services for a typical 2,077-square-foot house.

Although there was talk about a year and a half ago from Mayor Chavez that he'd consider re-aligning user fees to make Albuquerque more competitive, nothing seemed to come of it. With the national housing market in the tank and Albuquerque bound to be impacted sooner or later, perhaps now is the time to evaluate the situation?

Posted by Paul Gessing at 03:19 PM | Permalink | Comments (0) | TrackBacks (0)

Recently, the Rio Grande Foundation released its study of the "local" tax burdens (gross receipts and property) of New Mexico's 10-largest cities. Carlsbad and Hobbs were found to have the lowest burdens as a percentage of income while Albuquerque and Las Cruces residents faced the heaviest burdens.

To calculate your own gross receipts and property tax burden (assuming a new purchase that is not impacted by the 3 percent property tax cap), go to our website and use the tax burden calculator.

Posted by Paul Gessing at 11:32 AM | Permalink | Comments (0) | TrackBacks (0)

An article in the Albuquerque Journal's Business Outlook section yesterday (subscription required) focused on the Universal Service Fund and the fact that Qwest, which has major operations in New Mexico, has called the Fund "outdated." In case you don't know, the Universal Service Fund is one of those line items on your phone bill that turn a $14 bill into a $28 bill.

Specifically, it is a nearly 12 percent surcharge on phone bills to subsidize phone service in rural areas, mountain communities and other places where installing equipment and making a profit would be difficult. Now, I know that New Mexico is one of those areas that have probably benefited disproportionately over the years from this subsidy, but with the fund at $4 billion and few in need of the subsidy, one might think that Qwest would ask for the fee to be dropped entirely since it impacts their customers.

Not so, instead Qwest and some federal lawmakers have proposed using some of the funds to provide hard-to-reach customers with broadband service. Great, now we can all subsidize broadband service for Ted Turner's house.

Posted by Paul Gessing at 10:52 AM | Permalink | Comments (0) | TrackBacks (0)

I'm all for tax cuts, but does it really make sense for New Mexico to target boxing, wrestling, and martial arts events for gross receipts tax elimination? If New Mexico is going to continue with this fiction of a broad and fair tax policy as the gross receipts tax is supposed to be, then we can't carve a loophole for everyone who wants one.

Again, as we saw with the Las Cruces convocation center losing events to Texas as a result of New Mexico's charging tax on tickets and Texas not doing so, it is another sign that taxes do matter.

I just wish our elected officials would reduce the tax burden on all New Mexicans, not just those who run sporting events the Governor likes or who face an immediate threat from another state.

Posted by Paul Gessing at 10:44 PM | Permalink | Comments (0) | TrackBacks (0)

You may have seen this article in today's Albuquerque Journal. We're always happy to get published in New Mexico's largest newspaper, but I wish they would have gotten the headline right...the gross receipts tax is NOT a sales tax! I pointed this out in the article today and I wrote an entire piece in the Albuquerque Tribune outlining the differences between the two and the greater economic harm that results from our gross receipts tax.

Regardless of what you call the tax, it is clear that Albuquerque has seen a rapid uptick in tax rates this decade. Hopefully Mayor Chavez's proposal marks the beginning of further tax cuts.

Posted by Paul Gessing at 05:30 PM | Permalink | Comments (0) | TrackBacks (0)

The Rio Grande Foundation is not alone in looking out for the interests of limited government and taxpayers. Albuquerque's grassroots taxpayer advocacy organization -- which goes by the moniker SWAT (stop wasting albuquerque taxes -- is getting national attention as well.

While there will undoubtedly be battles to fight between now and June, the SWAT activists (and any others who may be interested in learning about the fight for limited government) will be heading to Washington for a "nuts and bolts" conference held by the National Taxpayers Union.

Once the activists get back from Washington with new information and weapons in the fight against higher taxes, Mayor Chavez and the tax-and-spenders on City Council better watch out!

Posted by Paul Gessing at 10:45 AM | Permalink | Comments (0) | TrackBacks (0)

The latest estimaes are in and it looks like New Mexico is in for a massive windfall of $720 million in FY 2008. While we are confident that our elected officials would have no problem spending it all, thus digging the state a financial hole, it makes more sense for our economically-impoverished state to continue reducing the income tax burden the state places on the productive activities of its citizens. With $720 million in unanticipated revenues, there is no reason to stop cutting the income tax when the rate reaches 4.9 percent.

Posted by Paul Gessing at 11:23 PM | Permalink | Comments (0) | TrackBacks (0)

Check out Paul's article today in NRO:

Fueled by oil and gas revenues that have been flowing into government coffers at a record pace, New Mexico has joined the nationwide rush to embrace expensive rail projects, with little regard for cost and even less consideration for utility.

Unfortunately, Rail Runner is just one of New Mexico’s rail boondoggles. Albuquerque’s city council recently adopted a plan that would build a $270 million “modern streetcar” system, with up to $135 million of that money being funneled into one small part of the city from all over the state.

Although Richardson has not formally committed state funding to the scheme, as a close ally of Albuquerque mayor Martin Chavez, he has committed to “being helpful in contributing to the project.” With Richardson, “help” usually comes in the form of a tall stack of taxpayer dollars.

Read the whole thing.

Posted by Harry Messenheimer at 08:01 AM | Permalink | Comments (0) | TrackBacks (0)