Tax cuts won’t bring more jobs

In the name of job creation, the New Mexico Legislature approved the governor’s call to cut taxes for businesses coupled with an authorization to local governments to make up losses by increasing local taxes. While having bipartisan support, this legislation is misconceived.

Jobs are created by increased demand for products and services, by the prospect of higher profits, not by business tax reductions. The tax tail doesn’t wag the jobs dog.

Jobs result from ordinary people spending their money, increasing the demand for goods and services. Increased demand results in hiring. Tax reductions don’t create demand or stimulate hiring. Cutting business taxes may put money in the pockets of the few, but it will certainly not create a hiring boom.

Henry Ford paid his auto workers well because he wanted them to be able to afford his cars. The bill raising the minimum wage in New Mexico will, if signed into law, have a larger effect on stimulating demand than will the business tax cuts.

Yet, the governor has threatened a veto. Her view is wrong-headed.

Finally, if localities have to raise taxes locally to offset revenue lost by business tax cuts, who suffers and what are the consequences? Sales tax increases hurt those who already spend most of their income and thus necessarily reduces discretionary spending, the very spending that stimulates demand and ultimately leads to more jobs.

Increased real estate taxes foster ghettos of richer and poorer, deepening an already deep divide.

One only needs to look to New Jersey with the highest real estate taxes in the nation to see the vast social and economic differentials between communities that rely on real estate taxes for local funding.

While the governor and the Legislature mean well, I fear they will regret the unintended consequences of their actions.