A couple of weeks ago I read an article in the New Mexico Business Weekly about the funding challenges faced by the art scene. In particuliar this really resonated with me [emphasis added]:
Chief among the challenges is funding.
This is due, in part, to the metro area’s lack of a large corporate base and a small philanthropic community. But BBER also lays some blame on the “excessive focus” of the public sector on the area’s largest institutions, such as the Albuquerque BioPark. The BioPark and the science museums get the largest individual slice of city expenditures for culture entities (about $11.3 million in 2004).
When I was in the not for profit sector, I was painfully aware of the lack of a large corporate base, and its no different running a service based business. We just don’t have enough corporations headquartered in New Mexico. Sure, we’re doing a good job of attracting startups, but what we really need are a few blue chip companies to move into the state.
This is going to be especially true after the 2008 election cycle. Let’s face it, in the House and the Senate seniority is king, and we’re about to have an 80% freshman delegation. Ouch! My prediction is that we are going to start bleeding federal dollars to the tune of $1 billion dollars.
Does this mean that all is lost? No. However, it does mean that we need to get serious about attracting big business to New Mexico. The problem is that according to a recent study by the New Mexico Tax Research Institute (Hat tip: Capital Report) it looks like our tax policy is evolving in such a way to repel rather than attract big business to New Mexico:
The New Mexico Taxation and Revenue Department just released its gross receipts tax (“GRT”) rate tables applicable for the six months beginning January 1, 2008. For the first time in history, New Mexico has not just one, but five jurisdictions that will see rates in excess of 8%.
Taos Ski Valley leads the pack at 8.4375%, with Red River, Logan, San Jon, and Tucumcari also coming in at 8% or higher. Nineteen other locations will have rates between 7.5 and 8.0%, including Taos, Santa Fe, Espanola, Ruidoso, Raton, Portales, Las Vegas, Bloomfield and Aztec. While rates have historically been higher in tourist destinations, the higher rates seem to be more contagious to other locales lately. Albuquerque rates remain unchanged at seemingly modest 6.875%, however that’s still 18% higher than in 2003 when purchasers in the state’s largest city enjoyed rates below 6%. The new rate schedules are posted on the Taxation and Revenue Department’s website’s homepage.
I’ve said before that in the last few years the Governor has been playing a shell game with our tax system. Governor Richardson loves to portray himself as the tax cutting Governor, but the reality is that under his guidance taxes in the state have been increasing at an alarming rate, and due to the policy in place, we could see municipal taxes in excess of 10%!
This trend needs to be reversed, and it needs to be reversed quickly. High taxes combined with a loss of hundreds of millions in federal dollars is the perfect recipe for an economic disaster in New Mexico.
One simple solution. Get rid of corporate income tax in New Mexico. We could become one of only four states in the nation to have this key competitive advantage. The cost for getting rid of corporate income tax is only about $300 million in revenue. Considering what Governor Richardson has spent chasing trains, spacecrafts and movies, that’s nothing. Right now the other states that have no corporate income tax are South Dakota, Nevada and Wyoming. Now compare our quality of place to those other three, and it becomes obvious that we would jump to the head of the line.
We need to stop playing with special incentives for one industry or another, and instead have a tax policy that induces all large successful businesses to call New Mexico home.