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Sunday, October 18, 2009

Roll Back Tax Cuts To Raise Revenue

By Sen. Dede Feldman
Albuquerque Democrat
          A world of hurt. Gloom and doom. Widespread panic. A huge mess. These are just some of the phrases lawmakers have used to describe both the current budget situation and people's reactions to it. Clearly, things are bad. But in our gloom and panic, we must make sure we don't do something that makes it worse. Relying solely on spending cuts would be that something.
        We must take a balanced, even-handed approach, and that includes raising new revenue. There may be a few areas of the budget where we can trim a little more, but certainly not enough to cover what could be a $650 million chasm. Economists are clear on this: Cutting state spending, which is integral to the state's economy, is the worst thing to do during a recession. Money must be pumped into the economy, not siphoned out. Rolling back tax cuts for the highest income earners, withdrawing tax breaks that do not serve the best interests of the state, and making sure profitable, out-of-state corporations are paying their fair share are all ways to pump money into the economy without raiding the pockets of working families.
        We are at the point where we must roll back tax breaks that were previously approved and we must do it now to make sure that it kicks in as soon as possible. During the special session that started Saturday, the Legislature and governor must be realistic, face up to the crisis we are already in, and not postpone necessary action for another three months. Rolling back tax cuts is inevitable come January, and everyone knows it. Why lose six months of urgently needed revenue when we have the opportunity to act now?
        A rollback of the tax cuts given to the wealthiest New Mexicans or instituting a personal income surtax of 3 percent on the highest income earners could be made effective on Jan. 1, 2010. This could raise more than $100 million during the final six months of the fiscal year. We could get started right away making sure out-of-state corporations pay income tax on their New Mexico profits, just like New Mexico businesses do. Measures to ensure that out-of-state corporations pay their fair share have been introduced by Sen. Peter Wirth for years, but to no avail. Measures to tax sugary soft drinks that add to the cost of obesity in our state have been introduced by Sen. Jerry Ortiz y Pino, also to no avail. But these two measures alone could bring in up to $76 million annually.
        When times were flush, we enacted personal income tax cuts that overwhelmingly benefitted the wealthiest among us. These and other tax cuts have added up to a loss of $2 billion over the past six years. Now that times are bad, those who can most afford it need to step up to the plate and help us get out of this hole.
        By relying on just spending cuts we are ensuring that those who can least afford it will be required to make the most sacrifice. These are the very people — hardworking, average New Mexicans — who are already most heavily hit by the effects of the recession. Why should the budget be balanced on their backs?
        Every Western state except New Mexico and Alaska already has raised taxes to help deal with this devastating recession. Surtaxes on the highest income earners and increases on tobacco and alcohol taxes are among the measures that other states have recently enacted to combat their own budget shortfalls. New Mexico would be in good company in taking these responsible steps.
        If we wait until January, things are only going to get worse. In the next fiscal year, starting next July, we will have to restore at least $250 million in federal stimulus money we are using to help the current budget. We will not be able to continue to divert money from the state's capital funds again without doing major harm to our school buildings, water systems, roads and other public facilities. Next year, our reserves will be so low that we cannot responsibly tap them again.
        We have a serious crisis on our hands and it is time to get serious about real solutions. We cannot responsibly kick the can down the road for three more months while public services fall apart. We urge Gov. Bill Richardson and all our legislators to recognize that a balanced approach to the current crisis, which includes raising revenues in the special session, is the only responsible course.
        Sen. Dede Feldman is the chair of the Senate Public Affairs committee and has represented the North Valley and other areas of Albuquerque for 13 years.