SANTA FE – New Mexico has a billion-dollar appetite for tax incentives – with more than 110 such tax breaks already on the books – and it shows no signs of abating.
Roughly 60 bills have been introduced at the Legislature this year that would either establish new tax incentives or expand existing ones, according to a Journal review.
The proposed incentives, which include tax credits, exemptions and deductions, would grant tax breaks for expenses ranging from chile production to movies to school bus fuel. And that’s just a sampling.
Some lawmakers say the glut of tax incentive proposals is problematic, since such “carve-outs” can pressure state and local governments to consider raising tax rates in order to compensate for the lost revenue from the state.
“I’ve never seen a tax credit that wasn’t a good idea for the entity getting it,” said Senate Republican Whip Bill Payne of Albuquerque. “The problem is in the aggregate.”
In all, there are already 113 types of tax incentives in place in New Mexico, according to a review done by the Legislative Finance Committee.
The legislative agency has estimated the total state cost of those incentives to be roughly $1.1 billion for the upcoming budget year. Approved state spending for the year is expected to be about $5.9 billion.
Richard Anklam, the president and executive director of the New Mexico Tax Research Institute, said tax incentives are intended to spark economic behavior and can ultimately help the state financially.
However, he said many such tax breaks end up costing the state without prompting new consumer or business activity.
“If it’s not really well designed or well-targeted to achieve the desired result, it’s a tough game to play,” Anklam said Thursday.
Legislators have already approved several expansions of tax incentives during this year’s 60-day session, including a measure that would allow long-running television shows filmed in New Mexico to pocket larger tax rebates from the state.
On Thursday, House members voted 64-1 to approve a bill sponsored by Rep. Patricia Lundstrom, D-Gallup, that would give a deduction for locomotive fuel costs. Just one railway, Burlington Northern Santa Fe, would likely qualify for the tax break, which would cost the state an estimated $3 million by the 2016 fiscal year, according to a legislative analysis.
Meanwhile, legislation also has been introduced to rein in several tax incentives that have ended up costing the state more than originally expected.
However, some lawmakers believe the Legislature should take a bigger picture look at the state’s tax code.
“The big question is, ‘If you took away those incentives but lowered the (tax) rate, would that help the overall economy?'” Payne said. — This article appeared on page A6 of the Albuquerque Journal