Computer model for tax reform isn’t ready

SANTA FE — The computer model designed to help New Mexico legislators analyze potential changes to the tax code isn’t ready yet, even as this year’s session opened Tuesday and lawmakers prepared to consider overhauling the tax system.

Ernst & Young, an international firm, was hired last year to develop the model in time for this year’s session.

The company anticipated turning the model over to lawmakers in December, unless the state failed to provide the required data in time, according to the firm’s contract. Ernst & Young didn’t respond to a question about when it received the data.

Supporters say the model is a critical tool that would give lawmakers the confidence

they need to make changes to the tax code and avoid unintended consequences.

New Mexico hired Ernst & Young last year under a $400,000 contract — about $228,000 of which is for delivery of the tax model. The remainder is for other work, such as analysis of the strengths and weaknesses of the state tax system.

Republican Gov. Susana Martinez has made overhauling the tax code a priority. Her office called the contract a “stalling tactic.”

“Of course we’re disappointed the study won’t be ready, but not surprised,” Martinez spokesman Michael Lonergan said in a written statement. “Legislative Democrats already admitted they were never serious about real tax reform. They wasted $400,000 in taxpayer money on this as a stalling tactic, nothing more.”

It was Republican Sen. William Sharer of Farmington who pushed for the study — after tax-law changes emerged as a key point of contention between Martinez and the Legislature during last year’s regular and special sessions.

In some cases, the two sides couldn’t even agree on how the proposed changes would affect revenue. Democrats said they wanted to ensure that overhauling the tax code wouldn’t leave the state without enough money to operate the government.

Sharer proposed the tax study and model as a way to provide unbiased information that would help lawmakers craft their proposals.

Senate Majority Leader Peter Wirth, D-Santa Fe, said the availability of the model will be a “factor” in whether the Legislature passes a series of tax law changes this year.

“It’s frustrating,” Wirth said in an interview. “Everyone worked under the assumption that we’d have the tool.”

Martinez has repeatedly called for simplifying the tax code as a way to improve New Mexico’s business environment. She said the idea has been studied enough, and it’s time to act.

Raúl Burciaga, director of the Legislative Council Service, an agency that staffs the Legislature, said it isn’t clear whether the model will be ready by the end of the session, though he’s hopeful it will be. The 30-day session ends Feb. 15.

“The Ernst & Young model is still under development,” he said in a written statement. “It will not be available to model tax reforms until finalized.”

Burciaga said legislative staff members have spoken to current and former state economists and “we are working with E&Y to address issues raised to ensure functionality.”

House Speaker Brian Egolf, D-Santa Fe, suggested Tuesday that overhauling the tax code could be a longshot in the 30-day session.

“The fact that we don’t need tax reform to balance the budget has taken some of the energy out of the effort,” he told reporters.

However, he said Rep. Jim Trujillo, D-Santa Fe, will introduce legislation later this week that would phase out various existing tax breaks and impose the state’s gross receipts tax on internet sales, among other things.

Sharer; Rep. Jason Harper, R-Rio Rancho; and Martinez administration officials have all been working on tax law proposals, too.