Posts Tagged ‘Tax policy’

2010 The Year of the Tax Increase

Thursday, December 31st, 2009

Every year Governor Richardson gives a name to the upcoming legislative session. Well, if even a small part of the proposals made by Governor Richardson’s Budget Balancing Task Force come to pass, the 2010 legislative session will be known as The Year of the Tax Increase. Actually, we should probably make that plural. This 400+ page document has tax upon tax upon tax proposed as the solution to our supposed budget woes.

Some of these tax increases, if passed, would take effect TOMORROW. I kid you not. Proposed income tax increases would begin tomorrow and are designed to take $327,971,000 out of our pockets over the next five years and give it to elected officials to make up for their spending spree over the last seven years. Now, while the economy, at least temporarily, does not seem to be getting worse, it also doesn’t seem to be getting any better.  Unemployment numbers are holding steady at levels not seen since the 1940’s:

New Mexico’s jobless rate remained steady at 7.8 percent in November, the same as the previous month but much higher than the 4.6 percent rate in November 2008.
    

The national unemployment rate in November decreased to 10 percent.
    

The state’s labor department, the Department of Workforce Solutions, says the state lost 25,400 jobs over the past year.
    

The department says the decline in the number of jobs is the worst New Mexico has seen in modern times and it will be a number of years until employment reaches pre-recession levels. 

That’s right, it will be many more years until we get back to healthy rates of employment and a growing economy.  Yet, for those of you lucky enough to be holding a job, you’re going to find yourself, not only working harder because you’re doing the work that used to be done by two or more people, but also working for less, because state government is going to be taking hundreds of millions of dollars out of your pocket.


Remember all tax increases are permanent. It’s just the nature of the beast. Consider this from the report:


The gross receipts tax was first levied in 1934 (as the emergency school tax) as a temporary measure to keep the schools open; it was made permanent in 1935. The tax applied to almost all business sectors, including services. This contrasted markedly with other early-adopter states, like Mississippi, which taxed only sales of tangible goods. In 1966, the tax was reorganized and renamed as the gross receipts tax.

Government  always uses some sort of “emergency” to rationalize its takings, be they individual freedoms or financial. However, long after the “emergency” has subsided, what was supposed to be a temporary measure becomes permanent.  There are those who think it is time to raise these GRT taxes even higher. Yet, consider that:

The table following the map shows that New Mexico’s average tax rate is the 28th highest out of the 46 states with a sales tax. However, New Mexico ranks fifth highest in terms of sales tax revenue as a percent of personal income, a result of both the relatively low level of personal income in New Mexico and the broad base of New Mexico’s gross receipts tax.

What, fifth highest in terms of sales tax revenue is not high enough? We want to be number one? I really don’t see how being at the top of this list would be a good thing. Let me put this in another perspective, total GRT collected from us, the taxpaying public, in 2004 was $2.3 BILLION.  Five years later, the economic crisis has resulted in only $3.2 BILLION taken from our bank accounts.

Wait a second! That’s not a decline in GRT.  That’s an increase in GRT revenue ! In fact, that’s a 38% increase in taxes in collected.  Now, ask yourself, am I making 38% more today than I was five years ago?  If the answer is yes, well, you’re lucky. But, the truth is that as a whole we’re only making about 22% more today than we were in 2004.  If the government thinks they are in a crisis, then the taxpaying public must be beyond crisis. Yet, they want to raise our taxes even more.

I could go on, but I think you get the point.  State government IS NOT in a revenue crisis situation.  The problem is that spending has been out of step with reality for many years now.  At the very least, we should be cutting expenses back to 2004 levels. If you doubt me, then ask yourself, are my neighbors, family and friends better off today that they were in 2004? I’d be very surprised if you could answer that with a “yes”.

If you’re the type to make New Year’s Resolutions, I’ve got easy one for you to make.  Resolve to call your legislators and the Governor, assuming you can locate him, and let them know if they like elected office, they will cut spending to bring it in line with our income growth before considering a single additional tax.

Chamber Advocates for Taxing Food

Wednesday, November 18th, 2009

This is one of those “Say What!” moments. I actually had to read it two or three times before I could believe what I was reading.

Terri Cole, president and CEO of the Albuquerque Chamber of Commerce, told the committee that she’d spoken with food banks and others who distribute food to the poor. “They tell me the tax break hasn’t really been that helpful to the very poor,” she said. Cole said it might be more helpful to bring back the food tax and have the state directly fund food distributions to the needy.

The food tax repeal costs the state about $200 million a year, Cole said.

Okay, this is wrong on so many levels. First a few disclaimers are in order. I used to be a Greater Albuquerque Chamber of Commerce member. I opted not to renew my membership when the Chamber made the decision to be the only Chamber of Commerce in the State of New Mexico to support Governor Richardson’s anti-business and ultimately ill-fated healthcare initiative. I’ve not looked back since, and with the Albuquerque Chamber now cheerleading regressive tax increases, I don’t think I ever will.

The second disclaimer is that I support food banks. We are Roadrunner Food Bank Full Plate Society members, and I’d encourage all readers of this blog to consider supporting this or other food bank efforts during these trying economic times.

So, with the disclaimers out of the way, let’s dive into the problems here. Teri Cole’s assertion that the tax break on food hasn’t been very helpful to those getting food from food banks is absurd. Of course, they aren’t helped by the tax break on food. They’re not buying the food. They’re given the food. So, there isn’t any tax for them to get a tax break. But, there are so many other families in need not utilizing food banks that are benefiting from that tax break.

Let’s also consider the cost of this break we got on food. You might remember that when the food tax was introduced, it was paired with another tax increase that resulted in a net tax gain:

CLAIM #4
eliminating the tax on food

FACT #4
“So while New Mexico is giving up gross receipts taxes on these qualifying medical and food receipts, it is going to be taking more from all other taxable receipts. According to Fred Winter, local CPA, “This means that the overall gross receipts tax rate will increase from 7.00% to 7.50% for the Town of Taos.”

Now, the Albuquerque Chamber wants to see the reduced tax increase piled on top of this previous tax increase. Are you kidding me?

And, the rationale for this increase?

The food tax repeal costs the state about $200 million a year, Cole said.

If the state passed a net tax increase along with the the tax cut. The state didn’t lose any money. It gained money. If you take the Chamber’s position to an extreme, consider how much money not having a 100% tax on all income is costing the state.

Since when does a Chamber of Commerce advocate for giving the government more of our hard-earned money?

Tucked Away in Bailouts

Wednesday, November 19th, 2008

Just keep this in mind that every time the D.C. folks talk about the urgent need for bailouts:

Tucked in among billions of U.S. taxpayer dollars to bail out Wall Street are a few crumbs for the people — not for the folks who took out risky mortgages or who thought someone else would pay off their credit card bills, but for that tiny slice of America that bicycles to work.

The Bicycle Commuter Act was among hundreds of earmarks federal lawmakers buried in the fine print of House Resolution 1424, aka the $700 billion bailout. It provides a way for employers to give bicycle commuters a whopping $20 a month as a tax-free fringe benefit. It’s not a lot of money, expected to cost the nation a mere $1 million a year, but it has the potential to be a big deal for bike commuters.

Mind you, I’m not against people biking to work, but was giving these folks an extra $20 a month really a priority considering everything facing our nation? I don’t think so.

The Oil Policy Difference

Thursday, July 31st, 2008

Just a couple of months ago, it was widely predicted that prices at the pump would hit five dollars by Labor Day. Now, it seems that we might actually see a drop in prices at the pump between now and the election in November.

However, don’t be fooled. If we see temporary relief, it will be just that – temporary. Relief designed to give the impression that we don’t need to increase domestic oil exploration. If the Democrats expand their control of the legislative branch and take control of the executive branch, we will see gas prices north of five dollars a gallon for a very simple reason (subscription):

Sen. John McCain, the presumed Republican presidential nominee, supports lifting a drilling ban along the Outer Continental Shelf and encouraging more offshore drilling and natural gas production in the Gulf of Mexico. Sen. Barack Obama, the all-but-certain Democratic nominee, has opposed lifting the current offshore drilling bans.

“There is no way for at least a generation that we can get by without more and more oil,” Domenici said. “If we could just use our own, we could save American dollars from flowing out of America.”

Meanwhile, President Bush on Wednesday renewed his request that Congress lift its moratorium on coastal oil and gas drilling.

“The American people are rightly frustrated by the failure of the Democratic leaders in Congress to enact commonsense solutions,” Bush said. “All the Democratic leaders have to do is to allow a vote. They should not leave Washington without doing so.”

Senate Majority Leader Harry Reid, D-Nevada, relented on the offshore drilling issue earlier this week, offering Republicans a chance to offer four amendments to the speculation bill, including one that would bring the drilling proposal to a Senate vote.

Look again at the bolded sections from Michael Coleman’s article. Even a goof like “Give ’em Hell Harry” recognizes the fact that domestic drilling deserves to be on the table. Yet, the Democrats presumptive nominee for President, Senator Barack Obama, remains stubbornly opposed to any common sense solution to ultimately returning market control of gas prices to Americans.

Instead, Senator Obama is perfectly happy to leave us hostage to the dictates of a cartel:

OPEC has rejected US pleas for raising production and the president of the cartel says he expects oil to stay at current price levels through the end of this year. That stands against a market where oil demand has gone up 1.5 million barrels a day for the last ten years.

Now who gets hurt the most when Democrats in the U.S. government insist on blocking domestic oil production? The working poor and middle class families is who:

If gasoline prices move from their current average price of $3.20 to $5, the cost of fuel for a family that spends $50 a week for gas would move up over $1,000 a year. That would wipe out any tax rebate payments from the Federal government and drive the economy deeper into its currently slowdown. It would also further fracture already delicate P&Ls; and balance sheet at large auto makers and airlines. Retailers would get less traffic. Very few industries would be spared some effect.

“… wipe out any tax rebate payments from the Federal government and drive the economy deeper into its currently slowdown.” That’s also an important fact to keep in mind for Governor Richardson’s upcoming taxpayers funded Special Session.

We’re an oil producing state, yet the Governor is doing everything in his power to discourage oil production. He did it when he passed unnecessary pit rules, and he’ll do it again in the upcoming regular session by trying to bring the cap and trade scam to New Mexico.

Of course, in characteristic Richardson fashion, he is hoping to dupe New Mexicans into believing that by giving us a rebate, he is alleviating our pain. However, the plain and simple truth is that, like all other Richardson fiscal decisions to date, he is making it more expensive for most New Mexicans to live.

Who is Gouging Whom?

Wednesday, May 28th, 2008

The next time you empty your wallet at the pump consider this:

Another theme of the day’s testimony was that, if anyone is “gouging” consumers through the high price of gasoline, it is federal and state governments, not American oil companies. On the average, 15% percent of the cost of gasoline at the pump goes for taxes, while only 4% represents oil company profits. These figures were repeated several times, but, strangely, not a single Democratic Senator proposed relieving consumers’ anxieties about gas prices by reducing taxes.

Take the time to read more about the Congressional hearing held by the Senate Judiciary Committee to grill top executives from the petroleum industry.

Democratic Tax Policy

Thursday, March 13th, 2008

Tax policy is often difficult for folks to understand. Considering the actual number of pages involved, that’s probably no big surprise:

The complexity of the Tax Code has done nothing but grow since the Federal income tax was first introduced in this body in 1913.

When it was first created, the Tax Code was 400 pages. This year, it is 67,506 pages, nearly a 17,000 percent increase, pretty typical of government math.

Now, because we’re inching ever closer to Tax Filing Day, and because we’re in a presidential election year, I think it is important to simplify the basic Democratic approach to one aspect of tax policy – tax refunds:

If you don’t understand the Democrats’ version of tax refunds, maybe this will help explain it:

50,000 people went to a baseball game, but the game was rained out. A refund was then due.

The team was about to mail refunds when a group of Congressional Democrats stopped them and suggested that they send out the ticket refunds based on the Democrat National Committee’s interpretation of fairness.

Originally the refunds were to be paid based on the price each person had paid for the tickets. Unfortunately that meant most of the refund money would be going to the ticket holders that had purchased the most expensive tickets. This, according to the DNC, is considered totally unfair. A decision was then made to pay out the refunds in this manner:

  • People in the $10 seats will get back $15. After all, they have less money to spend on tickets to begin with. Call it an “Earned Income Ticket Credit.” Persons “earn” it by having few skills, poor work habits and low ambition, thus keeping them at entry-level wages.

  • People in the $25 seats will get back $25, because it “seems fair.”
  • People in the $50 seats will get back $1, because they already make a lot of money and don’t need a refund. After all, if they can afford a $50 ticket, they must not be paying enough taxes.
  • People in the $75 luxury box seats will each have to pay an additional $25 because it’s the “right thing to do.”
  • People walking past the stadium that couldn’t afford to buy a ticket for the game each will get a $10 refund, even though they didn’t pay anything for the tickets. They need the most help.

Now do you understand?

A hat tip to Maggie Thurber, who appears to have taken it from the March 2008 issue of the Charleston County GOP newsletter.

Rapidly Moving in the Wrong Direction

Wednesday, November 28th, 2007

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.