Do New Mexico tax breaks work? It’s hard to tell in expenditure report

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New Mexico lawmakers this week looked at a report that shows how much money escapes government collections due to tax breaks approved over the years. As lawmakers and the governor continue to examine how to reform New Mexico’s tax code, it’s timely. 

Called a tax expenditure budget, the report details more than a hundred tax deductions, credits and exemptions, how long each has been on the books, why they were enacted, and whether they achieve their desired result.

(Need a primer on what a tax expenditure budget is? See our special report in 2016). 

While the report is the size of a small book and would take more than an afternoon to read, lawmakers complained it didn’t have enough information, per Dan McKay at the ABQ Journal

And they’d have a point. There’s no data for some of the listings, and much of the report has limited usefulness for evaluation purposes. Many items have brief evaluation paragraphs with little information, or in some cases, simply the word “none.” 

More information about how government policy is made and whether it’s meeting intended goals is always better than less. 

Not only is this tax expenditure report incomplete, however, the data it contains isn’t as accessible to the public as it could be. 

For example, if you go to the National Conference of State Legislatures website, you’ll find a nifty tool: a searchable database of tax breaks for every state. Click on New Mexico and “all years” and the most recent year it has for the state – 2016 – will pop up, as does a breakdown of tax breaks by category. You’ll see that corporate income tax incentives, as well as energy tax breaks, take up more space in that year’s report than many other categories.  

We’re not saying that those tax breaks don’t have a legitimate public interest. We are saying the state can make it easier for the public to digest the information contained in a several-hundred-page report. 

Now back to the lack of data. 

Confidence in the policy making process is important, especially in light of recent history when the Legislature passed a gargantuan tax bill in the final five minutes of 2013’s legislative session, literally as the gavel dropped. 

One provision in that 2013 tax bill produced a dramatic increase in payouts for the state’s High Wage Job Tax Credit in each of the three following years. The Legislature returned in 2016 to amend the language to “close gaps in the statute’s language that allowed unintended recipients to receive the credit,” notes the 2018 tax expenditure report, which shows how much revenue the state lost until the fix was made. After the 2013 change, $162 million combined went out the door over the next three years. After the fix? Just $21 million over two years.

How that 2013 tax bill was passed doesn’t inspire confidence, nor do the unintended consequences of legislation passed without ample debate and scrutiny. 

Also troubling is how little we know about who’s lobbying for the tax breaks and for whom. Lobbyists work state lawmakers every session on behalf of their many employers, including very large corporations, and we assume they are often very successful.

As many gaps as there are in the state’s tax expenditure reports, you can find some interesting tidbits, including possible future issues that might come before the Legislature. 

You can find all of the reports online (they are listed under “publications”).

Editor’s note: This essay is part of NMID’s weekly newsletter The Week In Depth. You can sign up to receive it and all of our stories here.

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