Taxpayers need to know whether tax breaks work

If anyone needed more convincing the state’s tax structure needs reworking, here it is:

The nonpartisan Pew Charitable Trusts just released a new study putting New Mexico among 23 states that do a lousy job of evaluating business tax incentives to determine whether they’re worth the money they cost taxpayers. The study looks at credits, exemptions and deductions offered through the tax code that try to strengthen the economy by creating jobs and attracting new business. And it found a glaring omission: there is no annual return on investment analysis, something lawmakers have tried to get into law since at least 2007.

Then-Gov. Bill Richardson vetoed it that year. Gov. Susana Martinez did the same in 2011. And while Martinez then tasked her Taxation and Revenue Department with putting together the data, Pew points out that six years later, it amounts to a happy brochure without any information to let the public know what it is getting for its money. The study says the information Martinez requires in her annual reports includes “valuable descriptive information” on the tax incentives as well as policy recommendations but lacks “detail on the economic impacts of the programs.” In other words, this is what you paid for, but there’s no telling if you got it. Or didn’t. In 2016, there were somewhere between 130 and 153 tax breaks on the books — the range is because state bureaucrats can’t even figure out what constitutes a tax expenditure vs. a tax policy — and New Mexico left about $1 billion on the table in fiscal 2015 because of them. Was it worth it? Who knows? The Pew study points out such evaluations take “time, effort and persistence” but provide an undeniable payoff of “the information (policymakers) need to ensure that economic development tax incentives achieve strong results for states’ budgets, businesses and workers.”

In their personal lives, few New Mexicans would decide to keep paying for something without knowing if it worked — can you imagine writing a check every month for cable without ever turning on the television? And yet for at least a decade New Mexicans have given up hundreds of millions of dollars for tax breaks with no proof they bring development or jobs or investment to the state.

Martinez has called for a special legislative session to start May 24 and included a much-needed overhaul of the state’s tax system on lawmakers’ to-do list. And lawmakers have a blueprint to work off of — House Bill 412, a comprehensive reform of the state’s gross-receipts tax system sponsored by Republican Rep. Jason Harper of Rio Rancho and Democratic Sens. John Arthur Smith of Deming and Carlos Cisneros of Questa. It did not make it through the regular session, but its key points would help deliver a tax system that’s broad and shallow, meaning most everyone pays tax on most everything, but they all pay a lot less.

HB 412 achieves this in great part by eliminating most tax exemptions and loopholes. Any that survive should have to show a return on investment annually, and that should be codified in statute.

Because at least 10 years after state lawmakers tried to inject accountability into state tax breaks, the New Mexicans who are paying the bills deserve to finally know exactly what they are — or aren’t — getting for their money.