Tax Expenditure Budget: Does Governor’s executive order do the job?

By Matthew Reichbach

Senator Tim Keller

Clearly New Mexico spoke with Sen. Tim Keller, D-Albuquerque, about tax expenditure budgets. A tax expenditure budget would review all of the tax breaks that the state gives to different portions of the population — which adds up to around a billion dollars annually. The annual state budget is $5.4 billion.

A bill in the 2011 session sponsored by Keller that would require a tax expenditure budget, or a review of all tax loopholes and carveouts, passed both chambers of the New Mexico Legislature without opposition this year. The bill was then vetoed by Gov. Susana Martinez. A similar bill, sponsored by former state Rep. Brian Moore, R-Clayton, was vetoed by then-Gov. Bill Richardson in 2007.

Earlier this month, Martinez issued an executive order where she ordered a review of the tax expenditures.

Martinez said in a statement when ordering the review, “A thorough account of the state’s tax system will give us a better idea of what works, what doesn’t, and what we need to change in order to encourage greater job creation and economic growth through our tax structure.”

Keller, however, said in an interview with Clearly New Mexico that the bill that Martinez vetoed would have been preferable to Martinez’s approach for three reasons.

One is that Martinez’s executive order is not as comprehensive as the bill Keller would have passed, so Martinez can “pick and choose which [tax breaks] to investigate and report on.”

Another is that Keller’s bill would have had the Legislature and the Tax and Revenue Department work together on the tax expenditure budget. Martinez’s executive order will only have the Tax and Revenue Department, which is part of the executive branch, carry out the tax expenditure budget.

“And the third difference, which is probably the most important, is that it’s not a law,” Kellers aid. “So that at any given time she can decide not to do it and there is no accountability if she doesn’t do it.”

Keller also noted that it would not be binding to when a new governor enters office, which will happen in either 2015 or 2019.

“So we’re looking at this taking place for a couple of years then going away,” Keller said.

Keller said he would likely not introduce the bill again. However, he warned that if the report to look at all of the effects tax deductions, exemptions and credits is not sufficient, “a [veto] override is always a consideration.”

Veto overrides are uncommon in New Mexico, though the Senate voted to override a veto of Gov. Richardson’s in the 2010 session. The attempt failed in the House.

At the time, The New Mexico Independent reported, “According to the Legislative Council Service, the Senate’s override vote was the first time that body had ever voted to override Richardson on legislation. The House of Representatives did it once, in 2004.”

Two-thirds of both chambers must vote to override a veto for the override to become valid.

So what will Keller look for to see if the report is sufficient?

“It’s got to be as comprehensive as possible,” Keller said. “There are 109 of these different carveouts, or loopholes, so we want to look at all of them and not play favorites.”

Another key part of a successful report would be to track the benefits of each of the tax breaks, for example, jobs created or looking at which segment of the population that is helped.

Finally, he says the report should “recommend actions” and make judgments on whether the programs “are worth the taxpayers’ money.” For example, he believes the report should list whether the program deserves to have more money put in it, kept the same, reduced or even eliminated.

Keller believes it is important to find out which of these tax breaks are actually useful to the state. “Over time they, in aggregate, become a huge amount of money that the state doesn’t collect in taxes.”

Without such a report, it wouldn’t be clear the effects of these tax breaks on the economy and the state will not be able to see which tax breaks are valuable to the state’s economy.

For earlier Clearly NM coverage of the tax expenditure budget:

Gov. Can Still Sign Tax Expenditure Bill For Maximum Transparency and Taxpayer Accountability – April 8, 2011

Major Transparency and Accountability Measures Head to the Governor’s Desk
– March 18, 2011

Getting Corped: Their Legislature at Work – Feb. 16, 2011

Why Gov. Martinez Should Support a Tax Expenditure Budget – January 24, 2011

Time to track state tax expenditures – April 21, 2009


Assume a Rat: When Individualism Smells like Corporate Welfare

This is a great chart. Important too. Why?

There’s an increasingly persistent meme being used to justify another round of massive tax cuts for the super-rich — like those contained in the Ryan Budget plan recently passed by the House.  The meme is this:  The wealthy are the true “producers.” They’re “job creators” who will take any additional tax windfall and, presto… new manufacturing plants will spring up over night.

There’s also a “moral” component embedded in this meme. The reframe goes like this. For us to expect billionaires and large corporations to pay their fair share of taxes is really about “unjustly punishing” them for their “success.” It’s tantamount to theft.

What we have here is a perfect reflection of the moral universe conceived by Ayn Rand. And now an attempt is being made to enshrine her philosophy of radical individualism as official policy via the plan of Congressman Paul Ryan — a committed Randian.

This is Calvinism on steroids — but absent God (Rand was a militant atheist). Material success and wealth is a sign that you are one of the Elect, and thus favored by God Ayn. The poor, the weak, the sick? God Life is punishing them for their moral defects.

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Major Transparency and Accountability Measures Head to the Governor’s Desk

By Tracy Dingmann

Three bills aimed at ensuring more transparency and accountability for the people of New Mexico have been approved by the New Mexico State Legislature and are headed for the Governor’s desk.

Senate Bill 47, sponsored by Senator Tim Keller (D-Albuquerque) and House Bill 161, sponsored by Representative Eleanor Chavez (D-Albuquerque), call for the state to establish a tax expenditure budget.  This innovative budget mechanism is a transparency tool that would allow the state to present a full and accurate accounting of the vast array of tax breaks and giveaways contained in the tax code, including those that have generated so much controversy, such as  for the  oil and gas, mining and film industries.

Moreover, it will give policymakers and the public a rational basis upon which to determine the fiscal and economic impacts of these tax expenditures.  Which ones are beneficial to New Mexico, and which ones are not? Which ones should be scaled back or even discarded?

“With passage of SB47 we’ll be able to measure the costs and benefits of these tax breaks,” Keller said.  “Some of these tax expenditures play an important economic development role and some support vulnerable segments of the population. The challenge is right now we don’t know which ones are beneficial to our state and which ones aren’t needed.”

This could benefit all New Mexicans by freeing up money for necessary services for all, including healthcare, education and public safety.

Senator Keller estimates that the state maintains approximately 107 carve-outs that make up a whopping  $1 billion in uncollected annual taxes each year.

Another bill headed to the Governor now is Senate Bill 208, which calls for the state to establish a much stronger process for reviewing insurance rate increases. The bill, sponsored by Senator Dede Feldman (D-Albuquerque), gives consumers fair and more transparent ways to hold insurance companies accountable.

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