Editorial: Hold-harmless payouts injured accountability

For all the dire predictions about the phase-out of millions in state subsidies to local governments for not taxing food and medicine, there are as many comforting realities.

The decrease in so-called hold-harmless payouts — part of a compromise tax package designed to retain and keep jobs by making New Mexico competitive with our neighbors — doesn’t begin until 2016. Then, it will be phased in over the next 15 years. City and county governments that can not absorb the lost revenue can increase local taxes on non-foods and medicines. Small cities with fewer than 10,000 residents and counties with fewer than 48,000 residents will still get the subsidies.

And there will be a beacon of accountability shining from government ledgers.

Because instead of the state paying municipalities not to tax their residents, the state will use its tax money to pay for the services it is expected to provide, such as public schools and higher education, while municipalities will have to either live within their means to provide services locally, or expand those means.

It makes for a cleaner, more honest tax structure, and the package on the governor’s desk that it is a part of makes for a stronger economic and employment base.

In the words of Senate Finance Committee Chairman John Arthur Smith, D-Deming, this really is tax reform.

Other pieces include phasing in a 5-year reduction of the top corporate income tax rate from 7.6 percent to 5.9 percent; allowing manufacturers to calculate their corporate rate based on in-state sales rather than property and payroll (which removes the penalty for actually expanding operations in New Mexico); and requiring multi-state big-box retailers to calculate taxes on operations nationwide unless they add a certain number of non-retail jobs here.

Smith, one of the Legislature’s budget experts and an architect of the tax package, estimates it will close around $500 million in loopholes.

And that finally holds honesty and accountability harmless when it comes to the state’s tax system.

This editorial first appeared in the Albuquerque Journal. It was written by members of the editorial board and is unsigned as it represents the opinion of the newspaper rather than the writers.