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 V.15 No.8 | February 23 - March 1, 2006 

Ortiz y Pino

Sinking Out of Sight

Why the tax relief bill failed

With tax money from oil and gas production pouring into the State of New Mexico's coffers at an unprecedented rate, you might think the process of shaping a budget for the coming 12 months would be relatively simple. You would be wrong.

Somehow, having a lot of money available for spending meant there were even more outstretched hands extended toward the Treasury than those of the usual suspects. Bright ideas for spending the surplus were proliferating around the recent Legislative Session like bunnies in full rut, with the result that not even having an extra billion dollars to spend proved sufficient.

It proved impossible for legislators to gain agreement for several items the governor had requested. In itself that was not a surprise—chief executives rarely get everything they ask for. Some judicious paring of their shopping list is to be expected from deliberative bodies that have to preserve their image as prudent watchdogs of the public coffers.

But that the list of cuttings on the Roundhouse floor this year would include the governor's bill for tax relief was definitely a shocker. It turned out, I think, to have finally been sunk by the sheer weight of all the goodies that kept getting dumped on it. It was ultimately done in by its own popularity.

Ahead of time, everyone involved agreed that the surplus would make additional tax cuts possible. The recent Special Session had cut income taxes as well as some other lesser taxes. So much legislative enthusiasm for slashing revenues was shown then, just four months ago, that even the governor had cautioned against giving back too much to the taxpayers, since his modest proposals for cuts had produced far more extensive pruning by the lawmakers than he had judged wise.

Still, the healthy balances in all the state's pockets led even Richardson to float several proposals for more trimming. Chief among these were a new “Working Family Tax Credit” modeled on the Federal Earned Income Tax Credit. This modest and reasonable idea would put back into low- and middle-income families' hands much of the revenue that is taxed now due to our reliance on a sales tax for state and local revenues.

And the governor added some other sweeteners to the pot: tax cuts for the movie industry and certain health care providers; credits for solar energy apparatuses and for purchases of medical equipment by for-profit hospitals. It was a package of limited but defensible benefits, one that floated so high in the water that it immediately began attracting more refugees.

The lifeboat began dipping perilously close to the waterline when a bloated package of tax cuts for a coal-burning power plant to be built by out-of-state interests on the Navajo reservation was dumped into it. That also set in motion a great rush of other bright ideas for tax cuts, each of which was probably defensible individually but which in sum produced a definite sinking feeling for lawmakers.

That sinking feeling became a rapid plummet to the bottom when an eleventh-hour vote on the Senate floor to concur on the House-added amendments actually added two more heavy passengers. One was a tax credit for the full market value of any rancher's livestock that is lost to predators (cougars, bears, coyotes or wolves) and the second was an increase in the Working Family Allowance from 7.5 percent to 20 percent.

With those two bulky passengers added to its contents, the lifeboat sank beneath the surface, unsalvageable even to a Legislature and a governor eager to save it.

So in the overreaching ambition to help out many different groups of taxpayers, the sheer weight of all the bright ideas (relief from gross receipts taxes for underground irrigation tools; gasoline used in school buses; clinical lab services; biomass production; water produced by oil and gas producers, etc.) sank the entire project.

There were no survivors.

Of all the drowned contents of the vessel, the only one that had sparked much controversy was the Navajo power plant. And even that grandiose venture had its defenders as well as its detractors. Sen. Leonard Tsosie had extracted concessions from the developers of the plant that he argued made it justified.

It would be the cleanest coal-burning electricity generating facility in the Southwest. Its state-of-the-art scrubbers and high-efficiency boilers would represent significant improvements over the existing power plants in the Four Corners. And the developers had agreed to extend electric lines into all nearby residences on the reservation—a giant step.

However, the overall tax relief that would have been given to the project was huge, probably $60 million or more. Of course, the argument was made that if the plant is not built, there would be zero tax revenues and no jobs created, either.

In the end, all the good ideas (and maybe a few bad ones, too) came to naught. This year's try for a comprehensive tax cut package ended up sinking out of sight. The one next year probably ought to be wary of taking on too many heavyweight passengers.

It was a good demonstration of another tip for your Junior Legislator's notebook: “Sometimes you can kill a bill more efficiently with unrestrained enthusiasm than with outright opposition.” Stay tuned for more tips in the future. You never know when you might need them.

The opinions expressed are solely those of the writer.

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