An even playing field will create growth
New Mexico’s economy is diverse and resilient, but too many small- and medium-sized businesses, manufacturers and other job creators continue to face daunting challenges not only to grow and invest, but to merely make payroll and keep the lights on.
We have a resilient and diversified workforce, but not enough job opportunities are being created for those seeking work across the state. And while we’re making progress, our state unemployment rate is stubbornly the nation’s third highest.
Many of these economic challenges, unfortunately, have been created and worsened by the waves of job-stifling and investment-drowning regulations pouring out of Washington, D.C. Rather than work collaboratively and in partnership with job creators to foster opportunity aimed at growing the economy, anti-business elected officials have put special interest job crushing agendas ahead of commonsense solutions.
One of the latest examples of this regulatory overreach is the U.S. Treasury’s Section 385 proposal. Predicated on the current administration’s effort to crackdown on corporate “inversions,” this regulation — like so many others — is a shotgun approach that will create far-reaching and painful unintended consequences for job creators, including those here in New Mexico. The last thing New Mexicans need is more government disincentives on business growth that reduces job opportunities.
Their logic goes something like this: Disrupt how companies, including those with wholly domestic operations, manage cash flow and other intercompany financing practices by categorizing debt as equity from a tax perspective. This will discourage U.S.-based companies from investing abroad where corporate tax rates are far lower. While this may sound like a “solution” to a handful of Washington bureaucrats who have never worked in the real economy outside of government, this dangerous proposal presents grave threats to job creators and small businesses alike.
The result? Even higher regulatory compliance costs, less capital to invest in and grow enterprises, and ultimately fewer jobs being created and potentially more being lost. Rather than a narrowly crafted regulation, Washington’s one-size-fits-all approach won’t work for New Mexico and will have a chilling effect on job creation.
In fact, a recent Ernst & Young analysis makes clear that “the proposed regulations reach well beyond the inversion transactions that may have been their primary impetus.” What’s more, a 2016 Pricewaterhouse Coopers report concluded that this regulation could cost U.S. companies that have no intention of pursuing an inversion millions of dollars in regulatory compliance costs.
That precious, job-creating capital spent on regulatory compliance should be directed toward research, development, or expansion — activities that will directly boost New Mexico’s economy. But the proposed Treasury Section 385 regulation, it’s just another example of classic Washington red tape and overreach.
It’s maddening that some leaders in Washington continue to fail to address, or even acknowledge, the real elephant in the room as it relates to keeping the United States on even footing in the global economy. That is, meaningful tax reform.
Our corporate tax structure is outdated, highly noncompetitive, and punishing for American businesses and workers. If Washington wanted to spur investment and job growth here at home and ensure that we can compete globally in the 21st century, modernizing our crippling tax code in a bipartisan manner would be a great place to start.
Small and medium-sized businesses, the backbone of the American economy, as well as working families don’t want special treatment or handouts. We want and expect a fair and even playing field that encourages entrepreneurship, investment, risk-taking and job creation here at home.