Gov. Susana Martinez issued an executive order Friday asking the Taxation and Revenue Department to lead an investigation into the cost-effectiveness of “state tax expenditures” or the credits, exemptions and deductions that cost the state $1.3 billion in lost revenue each year.

Martinez vetoed a bipartisan bill that would have created a committee to review the approximately 300 loopholes, preferring to have TRD look at the expenditures by executive order.

In her order, Martinez said that tax credits were the same as spending programs: “These provisions have the effect of reducing state revenues and are thus equivalent to spending programs. For this reason they are referred to as  ‘tax expenditures.’”

Martinez’s position that various tax cuts are equivalent to spending programs is a different from national Republicans, who frequently say that tax cuts pay for themselves and government has a revenue problem, not a spending problem.

Much of the attention on corn-based ethanol has focused on the role that this supposedly renewable fuel is playing in driving up global food prices. Now environmental groups and some conservative politicians are pointing out another problem — corn-based ethanol consumes the bulk of federal funding on renewable energy and the big oil companies that blend the ethanol into gasoline are collecting subsidies to the tune of about $6 billion a year.

The Volumetric Ethanol Excise Tax Credit (or VEETC) is a 45 cents per gallon credit that goes to the refiner that blends the ethanol into fuel.

Because the government already mandates that ethanol be added to gasoline and bans the import of foreign ethanol, critics say that the VEETC is unnecessary to maintain supply and is now only a handout to the oil industry.

British Petroleum has not been open about the benefits it receives from the credit, but is widely believed to be the largest recipient of the credit.

The National Journal reported last year:

On BP’s website, the firm states: “As one of the largest blenders and marketers of biofuels in the nation, we blended over 1 billion gallons of ethanol with gasoline in 2008 alone.” Extrapolating from Energy Information Administration data on 2009 refining capacity, BP is estimated to have produced about 11.5 billion gallons of gasoline. If the company blended up to the 10 percent limit under current law, about 1.15 billion gallons would have been blended, translating to a $518 million tax benefit.

This credit wasn’t among those that the Senate considered scrapping weeks ago, but there does appear to be some political will to cut it.

Though presidential candidates are known to pander to the interest of farmers in Iowa, which holds the first conventions, campaigning in Iowa last month former Minnesota governor and Republican presidential candidate Tim Pawlenty said that ethanol credits need to be rolled back.

“We need to do it gradually. We need to do it fairly. But we need to do it,” Pawlenty said. “The hard truth is that there are no longer any sacred programs.”

Candidate Newt Gingrich — who has received hundreds of thousands of dollars as a consultant for the ethanol group Growth Energy — is among the few Republicans campaigning who have not endorsed cuts to the VEETC, according to Sheila Karpf, legislative and policy analyst for the Environmental Working Group, which has been tracking the issue.

Karpf said that the credit was intended to make gas with ethanol more affordable but oil and gas companies are allow to collect the subsidy no matter how much profit they make.

Government credits for ethanol blenders are also problematic, she said, because they drain off resources that could support better renewable energy options.

“Corn ethanol actually increases greenhouse gases in the near term,” she said. This is because ethanol is mostly made in facilities that burn coal and natural gas.

Corn ethanol was supposed to be a bridge fuel that would lead to advanced bio-fuels from algae, switch grass or other sources, she said, but the multiple federal incentives aimed at corn have stifled development of this potentially superior alternatives.

“The fact that we are still paying VEETC is crazy,“ she said, “a really bad waste of taxpayer money.”

Legislation to end the VEETC has bi-partisan support in Congress.

In March Senators Tom Coburn (R-OK) and Ben Cardin (D-MD) introduced a bill to repeal the VEETC.

“While there are a wide range of federal incentives available for ethanol production, the VEETC essentially provides free money for blenders who are already mandated by the Renewable Fuels Standard (RFS) to blend ethanol in fuel,” they said in a statement as they introduced the bill.

“Moreover, while born of good intentions, federal subsidies for ethanol have had less than satisfactory results. Ethanol-blended fuel is nearly a third less efficient than gasoline (ethanol burns at 68 percent the energy content of gasoline), has contributed to the increased price of corn (as well as land, feed, and other input costs), and can cause engine damage in motor vehicles.”

A March Government Accountability Office report recommended that Congress reconsider the VEETC and stated that the U.S. Environmental Protection Agency and the Treasury Dept. could save the federal government $5.7 billion by addressing duplicative efforts aimed at increasing domestic ethanol production.

Udall had voted to invoke cloture, a Senate procedure to end debate on the bill. Sen. Bingaman voted against invoking cloture because of his opposition to the bill.

“While I understand the value of a compromise, the literal costs of this deal for future generations of Americans is too much to concede,” Udall said in a statement. “With a depressed economy and high unemployment we should be finding ways to create jobs, pull America’s middle class from the edge and bolster our economy.”

Udall said in his statement that the tax cuts for the wealthiest Americans would not help the economy in the long-term.

“In terms of stimulating the economy, tax cuts for millionaires and billionaires is not an effective strategy,” Udall said. “And a compromise that significantly increases our already unsustainable debt while failing to spark job growth and the economy isn’t much of a compromise at all, and certainly not one I can support.”

In a statement after voting against invoking cloture, Bingaman said, “It extends tax cuts to the highest earners and adds a substantial estate tax cut that will make it very difficult for the next Congress to act in a responsible way to our serious deficit situation. For those reasons, I could not support it.”"

New Mexico’s congressmen are split on the tax cut-extension compromise that the White House brokered with Republicans. The compromise would extend tax cuts for those at all income levels, including those making $250,000 a year or more, and extend unemployment insurance for another 13 months.

Reps. Martin Heinrich and Ben Ray Luján both signed onto a letter opposing the deal while Rep. Harry Teague sent out a statement backing the proposal.

Heinrich and Luján were joined by 52 other House Democrats on the letter spearheaded by Rep. Peter Welch, D-Vt., which said the signatories “oppose acceding to Republican demands to extend the Bush tax cuts to millionaires and billionaires for two reasons.”

The letter continues:

First, it is fiscally irresponsible. Adding more than $900 billion to our national debt, as this proposal would do, handcuffs our ability to offer a balanced plan to achieve fiscal stability without a punishing effect on our current commitments, including Social Security and Medicare.

Second, it is grossly unfair. This proposal will hurt, not help, the majority of Americans in the middle class and those working hard to get there. Even as Republicans seek to add billions more to our national debt in tax cuts to the wealthy, they oppose extending unemployment benefits to workers and resist COLA increases to seniors.

Teague, who lost his re-election bid to Republican Steve Pearce last month, sent a statement to the media supporting the deal: “The bipartisan compromise negotiated by the President is not perfect, but allowing middle-class tax breaks to expire while we are still in this fragile economy will obstruct job creation and slow our economic growth.”

“I do have serious concerns about the long-term impact of extending the Bush tax cuts for wealthy Americans,” Teague wrote. “[B]ut it is important to note that those extensions are temporary and just one part of a larger package that includes maintaining tax cuts for the middle class, a new payroll tax cut for working Americans, key tax cuts for small businesses to spur investment and job creation, an earned income and child credit for hardworking families, a higher education credit to help families send their kids to college, and an extension of unemployment insurance for Americans seeking work.”

But while New Mexico’s overall ranking slipped 10 spots from last year’s 23rd best, the state’s income tax system still is better than 30 other states, rating 20th best, according to an annual report from the Washington-based Tax Foundation.

The Tax Foundation is a nonpartisan research organization that generally advocates lower tax rates and broader tax bases. It puts out an annual ranking of states in business friendliness.

The report’s public unveiling comes in the last days of the New Mexico governor’s race in which the state’s tax policy occasionally has come up for discussion, albeit in passing remarks rather than in serious, in-depth discussion. It’s difficult to tell whether the report will lead to even more back-and-forth in the waning days of the race between the candidates.

Republican Susana Martinez has criticized Gov. Bill Richardson, and by extension, her opponent Democratic Lt. Gov. Diane Denish, for what she has called the state’s onerous tax rates.

Meanwhile both Martinez and Denish have promised not to raise taxes during their first year in office if elected, a promise some state lawmakers have said might prove difficult to keep, given the state’s fiscal problems.

The state already faces a projected $260 million gap for the year that starts July 1, and that hole could grow larger.

The Tax Foundation summed up why it focused on states’ friendliness to business early in the report, saying that states with more competitive tax systems were likely to attract more businesses.

Here’s an excerpt from the report:

The modern market is characterized by mobile capital and labor. Therefore, companies will locate where they have the greatest competitive advantage. States with the best tax systems will be the most competitive in attracting new businesses and most effective at generating economic and employment

The foundation said New Mexico’s decision earlier this year to increase the state gross receipts tax by an eighth of a cent contributed to the state’s tumbling from having the 23rd-best tax system to 33rd. State lawmakers passed the tax measure as a response to the state’s ongoing economic woes.

New Mexico’s gross receipts tax system meanwhile ranked near the bottom, at 45th, when compared to other states, the foundation said.

The state’s ranking for its income tax structure stayed basically the same. New Mexico ranked 19th last year.

In recent years New Mexico has lowered the top income tax rate from 8.2 percent, to 4.9 percent, earning accolades from some, especially anti-tax groups, but criticism from others. Advocates for the poor have said the state’s decision to lower the income tax rate has meant cuts to services as the state deals with falling revenues have fallen disproportionately on the low-income.

In other areas, the state’s corporate tax burden ranked 31st this year while New Mexico ranked 1st, or least onerous, in property tax burden, according to the foundation.

Attendees for the mass rally head for the Lincoln Memorial on Oct. 2. (Jesse Zwick)

“Get your ‘End The War’ sign. Good for the next war,” yelled a good-natured peace activist on the Washington Mall Saturday. Code Pink, the group for antiwar women, and a sizable contingent of D.C. Statehood activists tabled not far away.

But the majority of the marchers, attending alongside their local union or progressive group members, moved steadily on in order to get a good spot on the National Mall and remind the nation that liberalism, as a concept, was not dead. It’s just been hibernating.

Indeed, the main focus of yesterday’s gathering, called One Nation Working Together and sponsored by nearly 500 progressive organizations, was jobs, and how the government should do more to promote them. This was evidenced by the thousands of signs and t-shirts that promoted the event’s main theme — “Jobs, Justice, and Education” — as well as its heavily unionized supporters.

“We bailed out the banks and the insurance companies. Now it’s time to bail out the American people,” urged the Rev. Al Sharpton, who drew some of the loudest cheers of the afternoon.

“I hope they look at the mall, because this is what America looks like,” he added. “Not one color or one gender.”

Sharpton’s remark about the diversity of the crowd, whose ranks included teamsters, electrical workers, teachers, auto workers, peace activists, and immigration reformers of all colors, rang true. But it may have also been an implicit dig against the tea party movement, whose rally the event was designed, in part, to rival.

Most signs stuck to bland, nonpartisan one-word cries like “Together,” “Forward,” or “Jobs,” but a few got at the nature of the rivalry as well. “I Want My Country Forward, Not Back,” read one of them, subtly challenging a common tea party trope. “Tea Parties are for Little Girls and their Imaginary Friends,” read another, less subtle one-liner.

But the largely broad, noncontroversial themes touted by the event succeeded in allowing the many progressive groups who signed on to join forces and put on a show of force the likes of which have been seldom seen since President Obama took office in 2008.

“We’re just so excited that all the progressives are working together because we notice a lot of times progressives each have their own little cause, but this time we’re all in it,” gushed Alice Hoffman, from the Philadelphia Federation of Teachers Local Three.

As to the main demand — jobs — attendees from all the groups agreed the country needed far more, but they posed a wide variety of responses about how to get them.

“We really believe that the people are hurting because the money is going to the wrong place,” noted Jane Dugdale of Mainline Peace Action, a group in suburban Philadelphia. “The military is being used to build an empire around the world that is breaking and bankrupting our country.”

“The jobs, the jobs, the jobs, the jobs,” said Michael Bartlett of the New York Teachers Union in response to what the most important issue for Obama should be. “It’s as simple as that. 90 percent of the old jobs have left here and we’ve become a service economy, but we still have to encourage [companies] to employ more people instead of laying off more people.”

“We have to start building up America again,” agreed Helen Lugo of the United Auto Workers, who’d travelled along with her local union by bus from Georgia. “We need to start exporting and stop importing,” she noted. “Something’s got to be equalized over here.”

The slashing of state and local social and educational services also ranked high on attendees’ list of grievances.

“Most of my childhood friends died over some dumb stuff, it’s like we all on some slum stuff, whatever happened to that we shall overcome stuff?” rapped Black Ice, a poet who provided entertainment between speakers. “What’s a young boy to do when he want to do right but there’s a lock on the right door? When he has the heart of a soldier and the aggression of a prize fighter but no one’s taught him what to fight for?”

Beyond putting pressure on the federal government for more jobs and services, however, the event was designed to encourage turnout for the 2010 midterm elections during a year that many Democrats have fretted about a lack of voter enthusiasm coming from their side of the political spectrum.

“2008 was not the end but the beginning,” urged Rev. Sharpton. “When I was in school we had midterm exams…. Well, we’ve got four weeks until the midterm exam and we’ve all got to go home and hit that pavement, knock on doors, and get ready for it.”

AFL-CIO President Richard Trumka sounded a similar appeal to union workers and progressive groups at the event as well. “Promise you won’t let anyone quiet us or turn us against each other. Promise to make your voices heard for jobs, justice, and education today — and on election day,” he urged the crowd. “Our best days are ahead, not behind us, and we will fight for them, and we won’t let anyone stand in our way.”

Attendees at the event yesterday appeared to get the message, but whether it translates into ramped up voter turnout for Democrats in November remains an open question.

“I think we will still support Obama, but he has to understand the plight of the ordinary man on the street,” noted Bartlett. “We realize that [doing more] is a difficult proposition for him, but he must also realize that we’re the same group who helped him get elected, so he can’t forget Main Street.”

“In recent weeks, we have heard from a diverse spectrum of economists, small business owners, and families who have voiced concerns that raising any taxes right now could negatively impact economic growth,” Rep. Melissa Bean, D-Ill., wrote in the letter Teague co-signed with Teague.

At question are the tax breaks for the highest rate of earners that were passed in 2001. President Barack Obama campaigned on and has proposed letting the tax breaks on those making $250,000 or more expire on time. The tax cuts on those making less would be extended.

“We urge the quick passage of legislation to extend the tax cuts so that American families and businesses have the certainty required to plan and make informed decisions,” the letter sent to Pelosi read. “The sooner we act, the sooner our nation’s economy will benefit.”

According to the Albuquerque Journal, the other two New Mexico Representatives, Martin Heinrich and Ben Ray Lujan, support letting the tax breaks for the wealthiest Americans expire. So do both of New Mexico’s Senators, Jeff Bingaman and Tom Udall. All of the members of New Mexico’s federal delegation are Democrats.

Treasury Secretary Timothy Geithner (epa/ZUMApress.com)

This weekend, Treasury Secretary Timothy Geithner appeared on two Sunday news programs to make the case for the expiry of the Bush tax cuts on the wealthiest earners and to argue for a strong recovery. The backdrop for the appearances is the looming fight over how to extend the 2001 and 2003 tax cuts. If Congress takes no action, taxes will rise for all income brackets.

The Obama administration hopes to extend the tax cuts for everyone making less than $125,000 a year, or $250,000 a year for couples. Some congressional Democrats want to keep lower taxes for all Americans until the recovery takes better hold. Most Republicans want to make the tax cuts entirely permanent. That sets the stage for a serious fight, during the run-up to the midterms, between the two parties and possibly among Democrats as well.

On This Week, Geithner called the Obama plan the “responsible thing to do, because we need to make sure we can show the world that [we are] willing as a country now to start to make some progress bringing down our long-term deficits.”  He also said that “letting those tax cuts that only go to 2 percent to 3 percent of Americans, the highest earning Americans in the country, expire” would not “have a negative effect on growth.”

That argument is designed to combat the Republican line that tax increases would cut GDP growth and jobs. In advance of November’s midterm elections, campaigning for which will begin in earnest after the August congressional recess, Republicans have prepared a talking-points campaign focusing on the “Democrat tax hike.”

Delivering the Republicans’ weekly radio address this weekend, Rep. Mike Pence (Ind.) argued, “The economic policies of this administration have failed. Last year, the Obama administration said that its trillion-dollar ’stimulus’ plan would create jobs ‘immediately’ … [but] unemployment remains near a heartbreaking 10 percent.”

He continued, “[I]f they haven’t already done enough to wreck our recovery, Democrats in Washington are pushing more spending, more regulation, and right around the corner: more taxes. Democrats in Washington are now actually talking about embracing what would be the largest tax increase in American history.”

But Democrats are not embracing the tax increases wholesale, and several Democrats support extending them for at least another year or two. Kent Conrad (D-N.D.), a deficit hawk and the head of the Senate Budget Committee, is arguing for extending all cuts. “In a perfect world, I would not be cutting spending or raising taxes for the next 18 months to two years,” he told reporters. “This downturn is still very much with us unfortunately.”

But the Obama administration is also heralding the economic turnaround more loudly than congressional Democrats. In a separate appearance on Meet The Press this weekend, Geithner said that “the most likely thing is, you see an economy that gradually strengthens over the next year or two. You see job growth start to come back again.”

Other economic figures do not agree. Testifying before Congress last week, Ben Bernanke, chairman of the Federal Reserve, described a weaker economy and argued for retaining tax cuts as a form of stimulus. “In the short term I would believe that we ought to maintain a reasonable degree of fiscal support, stimulus for the economy,” he said. “In the longer term, I think we need to be taking steps to reassure the American people and the markets that our fiscal situation is going to be well controlled.”

The Republican congressional leadership has argued that tax cuts do not need to be offset, because they are stimulative, a point contended by conservative and liberal economists.

Just four percent of all Americans thought that their taxes would be lowered.

“President Obama cut federal income taxes for low- and middle-income Americans in the economic stimulus plan, and is looking to extend the Bush-era tax cuts on middle-income families in his 2011 budget,” Gallup wrote in discussing the poll. “Still, a majority of people in low- and middle-income households expect their taxes to be raised over the next 12 months.”

Gallup offered one possible reason for the widespread belief that taxes would go up. “Americans may perceive that the federal government will need to raise taxes to pay for its greater spending and rising deficits since Obama took office, including the recently passed healthcare legislation, with its price tag of just under $1 trillion.”

The head of the Congressional Budget Office, the non-partisan organization that makes budget estimates on legislation in front of Congress, still believes that the health care reform bill will cut the federal deficit. However, a USA Today/Gallup poll from late last month found that most believed it would increase the federal deficit.

The study by the DC-based public policy organization Citizens for Tax Justice examined the tax breaks in legislation passed by Congress and signed by President Barack Obama. CTJ found that the average tax benefit from the American Recovery and Reinvestment Act, or the federal stimulus package, was a cut of $1,012.

“The 2009 federal income taxes that come due on April 15 have been cut for nearly all working Americans, including Americans at all income levels, by the Recovery Act signed by President Obama last year,” the report states. “No legislation enacted during the Obama administration increased taxes for 2009.”

We also invite readers to participate — so please share your thoughts on this question in the comments section. If you have suggestions for how we can improve this feature or have have an idea for a future question, send us an e-mail.

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?”

PAUL GESSING, president of the Rio Grande Foundation:

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.

JIM BACA, blogger, former director of the U.S. Bureau of Land Management, Albuquerque mayor, state land commissioner and recently retired natural resources trustee:

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.

BILL TURNER, hydrologist and former director of the Middle Rio Grande Conservancy District:

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.

MARK WINNE, food and agriculture policy expert, author of Closing the Food Gap:

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.

FRED NATHAN, executive director of Think New Mexico:

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.

TERRI COLE, president and CEO, Greater Albuquerque Chamber of Commerce:

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.

CARTER BUNDY, political action representative, AFSCME:

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? :)

RICHARD ANKLAM, president and executive director of the New Mexico Tax Research Institute, former director of tax policy for the New Mexico Taxation and Revenue Department:

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.