I am writing today to announce the closure of the New Mexico Independent. After three and a half years of operation in New Mexico, the board of the American Independent News Network, has decided to shift publication of its news…
Posts Tagged sin taxes
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Gov. Bill Richardson says he “hates” the food tax, but by reimposing the gross receipts tax on food, the state would save around $68 million that it’s been giving local governments to compensate for stripping the tax a few years ago. That’s lot of money. Are Richardson’s hands tied?
QUESTION: “Should Gov. Bill Richardson sign the food tax bill? If not, how specifically should he fill the hole that vetoing it will leave?”
This is a tough one. At this point, there is not much that can be done. I’d rather Richardson “hated” the business-killing gross receipts tax (GRT) which is far more harmful than the grocery tax and now exceeds 8 percent in some communities and will soon be above 7 percent in Albuquerque. Of course, he already raised the GRT once (by half a cent) to pay for elimination of the grocery tax the first time around, so consumers and businesses are getting hit with a double-whammy.
So, his hands may be tied at this point, but by ramming through the RailRunner, the Spaceport and $80 million annually in film subsidies, refusing to get serious about cutting government spending and our bloated state government (including merging agencies as was recommended by his own government efficiency task force), Richardson has tied his own hands. Since he won’t get serious about cutting spending, it looks like tax hikes are coming. Thus, reinstating the grocery tax is marginally less anti-economic growth than hiking the income tax or further hiking the GRT.
The Governor should veto the re-imposed food tax. It is just too regressive and hurts those who are on the bottom of the income brackets the most. I don’t believe the Governor’s hands are tied. He can call the legislators back into session no later than September 1 to deal with the issue. If the economy picks up in the meantime the Legislature may have an easier time of dealing with this. This might be overly simplistic, but sometimes simple things work. The Legislature has to come up with a way of living up to their responsibilities instead of trying to put the screws to cities and local governments. Those are where a good portion of the revenues are generated already. The Governor and lawmakers need to raise the income tax to fill in the deficit. It would be a fast and easy way of handling the situation. Perhaps a two year sunset on the tax hike could be put in place. We should not forget that the Governor and Legislature have cut revenues by almost a billion dollars in the last seven years.
Richardson should veto the food tax. It is an extremely regressive tax and it affects lower income people in a very disproportionate manner. The $68 million should be realized by dumping the 5,000 state employees that Richardson has added since the end of the frugal Johnson administration.
Gov. Richardson should not sign the food tax bill; he should veto it.
Why? In the checkout line the other day at Albertson’s, I saw an elderly woman empty out her purse for the change tangled up in her kleenex, gum wrappers, and other pocketbook effluvia. She was struggling to pay the grand sum of $33.14 for her groceries. Though I tried not to stare at her, I could tell she was embarrassed and that her hands were trembling. The matter was resolved (I suspect that the sympathetic cashier gave her an “under the table” break). After I checked out and wheeled my cart into the parking lot I saw a stylishly dressed woman loading bags upon bags of groceries into the back of her Lincoln SUV. Certainly no need to rifle through the bottom of her purse here. Why do we always turn to the least among us for financial solutions while letting those with ample capacity off the hook? The food tax is nothing more than another way of turning our pocket books inside out in hopes of scrounging up a few loose pennies from those who need them the most.
Governor Richardson should line-item veto the food tax. It is a regressive tax on a necessity that particularly punishes large families and low- and middle-income New Mexicans.
Many more sensible alternatives to the food tax have been proposed. We agree with Attorney General Gary King that if we must impose a regressive rather than a progressive tax, it would be far better to tax a luxury like alcohol than a necessity like food. According to the Attorney General, a liquor tax could raise as much as $80 million, eliminating the need for the $68 million food tax passed by the Legislature.
I’m in Beijing, China right now. We’re here on one of the Chamber’s Discovery Missions. This has nothing to do with the food tax, a question I will answer in a moment. But, for an on-line newspaper, like The New Mexico Independent, responding to this on-line— while on the way to the Great Wall of China—speaks volumes about the world today and about the role of online newspapers in the future.
Now, back to food. Yes. The Guv should sign the partial reinstatement of the food tax. Signing it gets us closer to the fact that it should never have been repealed in the first place. It was bad tax policy. We need broad based taxes so that they can be kept low and fair to all. We should, however, use effective programs like LICTR (Low Income Comprehensive Tax Rebate) to help New Mexicans neediest families. Finally, the package that the legislature came up with was hard fought and fragile. Finding another $68 million will be sure to ox someone’s gore. Let’s not.
This is an incredibly difficult dilemma, but one that in the end does have a decisive answer. My union proposed 19 different ideas for raising revenue, and was crystal clear that we thought raising the gross receipt tax and the food tax were the two least appealing options of the lot.
Four great ideas near the top of our list went through: Personal Income Tax add-backs are progressive and simply close a bizarre exemption only used now by five states. Applying the compensating tax to some out-of-state Internet sales is a long-overdue start to leveling the playing field for New Mexico businesses, including small brick-and-mortar shops. Withholding state tax from out-of-state residents who work here and owe us money is nothing more than a compliance and efficiency tweak, which even conservative Republicans voted for in the Senate. And the cigarette tax, while somewhat regressive, is also totally voluntary and has some outstanding health benefits and long-term cost benefits for the state.
Married to those four, though, were the small GRT and food tax increases, which moderate and conservative legislators insisted had to be part of the trade-off for the progressive elements of the revenue package. I agree with Terri and others that the GRT is also regressive, but it was also exceedingly small: 12.5 cents for every $100 spent.
As for the food tax, the Catholic Church knows that it already won a major victory by having it scaled back from 6-7 percent to 1-2 percent. I’m also glad for that victory. Food is going to be taxed at anywhere from 15 percent to less than a third of what other items are, and that’s due in large part to all of the advocates who argued for more progressive taxation and to the legislators in both chambers who listened.
So should that scaled-down food tax be vetoed? Absolutely not. Unless the same progressives think they can round up the votes for more progressive revenue sources, like a partial roll-back of the 40 percent tax break given to millionaires in 2003, a veto is insanely bad policy for the most vulnerable and poorest among us who use services like Medicaid and TANF, or child day care subsidies for working families.
Arguing for a veto is an easy political position to be sure. Most people don’t enjoy taxes of any kind, particularly conservatives, and progressives, including myself, are appalled at any regressive taxation. But the government programs that are funded by that $68 million form the very core of survival services for thousands of our most vulnerable.
If I thought there was one chance in 10 that the Legislature would come back and raise the personal income tax on the richest (say, $250,000 and up) New Mexicans in place of the partial food tax, I’d be in favor of giving it a shot. In Dumb and Dumber, Jim Carrey asks the girl of his dreams “Give it to me straight. What are my chances with you?” She replies “Not good.” He says “Like one-in-a-hundred”? She comes back with “More like one-in-a-million.” He lights up and says “Yes, so you’re saying there’s a chance!”
The revenue package is far from perfect, but it saved the programs we all know are vital for the poorest New Mexicans. Holding out hope for another special to make up the $68 million with progressive revenue is a bit too Carrey-esque for those of us who saw up close how hard it was even getting the current package to pass.
Finally, for my friend Paul, I still haven’t heard the explanation for how government hasn’t been cut when it’s been slashed by $700 million in 2009 and by another $300 million this year. Or how this administration is now about 15 percent SMALLER per capita than under Gary Johnson for front-line, classified employees, and several percent smaller overall per capita than under the RGF’s libertarian standard-bearer. But that’s the fun of being political, si? :)
Should he sign, (or can he veto it) and how to pay for it? Answering the should question: Yes. The Governor was a part of the deal, he crafted the proclamation calling the special session, and he should sign the bill. Just as important, it’s the right thing to do. When food was removed from the gross receipts tax base, the general fund paid the entire cost of that deduction, both the state tax and the local tax, because we held local governments “harmless,” paying them back the money they would have lost. To do that, the state’s rate was raised 10 percent on transactions within cities (by eliminating an inter-government rate credit), exacerbating regressivity and the pyramiding problem, and resulting in a $100 million bigger hit to the general fund than the analysts counted on. A significant part of this cost went to benefit moderate and higher income families, not to mention tourists. So they will also be included in paying the restored 2 percent tax this bill represents.
The proposal on the Governor’s desk is a partial fix to this problem and it also increases by 20 percent the Low Income Comprehensive Tax Rebate (“LICTR”) – a targeted mechanism to relieve the regressive effects of the state’s tax system from the most vulnerable. Apparently some believe that taxing food is “evil.” But taxes aren’t a punishment. They’re not a penalty for doing something wrong. They’re the cost we pay to live in a civilized society. And while the NMTRI doesn’t like regressive taxes, LICTR is the answer–not empty rhetoric on what should or should not be taxed.
Now back to the question of can he veto it and how to pay for it. I would never presume to tell this governor what he legally can and cannot do, so let’s look at the numbers. We still need to balance the budget. What is the alternative, more furloughs? We’d need 42.5 days from our state workers. He could veto some appropriations, but which ones? He has some amount of discretionary federal funds (ARRA), but they’re not enough and the budget is already asking him to cover $25 million of public school and higher education costs with those funds. He could veto LICTR at the same time since that’s why it’s there, but that needed to be looked at again and it would save only $5.3 million. He could also simply wait and see if the reserves are sufficient to cover the gap. That just postpones and increases the pain facing future administrations, legislatures, taxpayers and state funded programs.
The governor says he “hates” all tax increases and budget cut proposals, same as any mainstream politician will tell you; however these are tough times and we still haven’t stepped up to the plate. Next year, assuming the current revenue forecasts can hold up, we’ll still be facing another shortage of at least $220 million dollars – meaning another budget crisis like this year’s, or perhaps worse. Given the magnitude of the problem, I don’t think it’s asking too much for everyone to make a sacrifice and compromise on the solution. And it is just that – a compromise. This proposal won’t make any “side” happy, but we simply can’t afford poorly targeted and expensive populist tax policies at times like this, nor should we try to defer to the future the fiscal problems of today.
A bill to boost the state’s cigarette tax by 75 cents cleared an important legislative committee Tuesday afternoon, after a bit of arm-twisting and some last-minute horse trading by two Democratic lawmakers. The sheer effort to push the bill out of the House Taxation and Revenue Committee gives one a sense of how difficult the New Mexico Legislature is finding it to pass out a state budget.
The state budget deal legislative leaders reach may generate $233 million in new revenue, in part by taking back $70-$100 million it has been sending each year to New Mexico cities to help compensate for the lack of a food tax. In return, cities would get the authority to tax food up to 2 percent. Also in the works: education cuts, a gross receipts tax hike and two versions of a cigarette tax hike.
The group Better Choices New Mexico (BCNM) is currently proposing nine ways to raise revenue and prevent more budget cuts and is releasing one proposal per day until the start of the legislatives session.