OPINION: It's raining cats and dogs, time to fix New Mexico's tax system

I love New Mexico. My family has called this land home for generations — on both sides, we've been pioneers, ranchers, lawyers, architects and railroad engineers. My grandfather, John Trigg, was a wildcatter who helped discover the Delaware Basin, now one of the most prolific oil-producing regions in the entire world. These days, I work extensively in Mexico, where I get to see the origins of the culture that makes our state so unique, so extraordinary.

But when I come home, my heart breaks.

Year after year, the reports tell the same story: highest in crime, lowest in education, doctors fleeing the state, our young people leaving to build their lives elsewhere. And year after year, nothing changes. We are surrounded on three sides by Arizona, Colorado and Texas — states with thriving economies, excellent schools, quality health care and far less crime. Their citizens are prospering. Ours are struggling.

Why?

Part of the answer lies in a tax system that has strangled this state for decades: the gross receipts tax.

New Mexico's gross receipts tax is what economists call a regressive tax — it punishes the poor far more than the wealthy. It is a tax on virtually all goods and services, and it drives businesses either to fail here or to never locate here in the first place. It keeps our medical industry from flourishing, not because of malpractice concerns, but because the tax burden makes operating here untenable. It suppresses job creation, stifles entrepreneurship and places a financial yoke around every New Mexican's neck.

I know this problem intimately. Years ago, I served as an attorney to the Legislative Council Service and sat on the tax committee. We studied whether there was a way to replace the gross receipts tax. The conclusion was sobering: eliminate it, and the state loses the revenue needed to function. No one wanted to raise property taxes — and they shouldn't be raised. So, nothing changed. Decade after decade, we've remained trapped.

But something else has changed: the Delaware Basin is now generating billions in revenue for this state. Our Severance Tax Permanent Fund has swelled to become the second-largest such fund in the nation. We are sitting on a fortune that most states — most countries — can only dream of. With barely 2 million people, we should be as wealthy as the oil kingdoms of the Middle East.

So where is the money going? And more importantly — why isn't it being deployed to get us off these shameful lists?

The architects of the Severance Tax Permanent Fund were wise. They designed it to be protected from the political whims of each legislative session, to grow and generate proceeds that fund essential services. That architecture is sound and should be preserved. But they also understood that extraordinary times might require extraordinary measures.

New Mexico, this is that extraordinary time.

I propose a constitutional amendment — temporary and limited in scope — that would allow us to draw a modest percentage from this overfunded permanent fund to bridge the transition from our punitive gross receipts tax to a fairer, broader-based system like those in Texas, Arizona or Colorado. The amendment would have a sunset provision; once we achieve revenue neutrality under the new system, the door closes, and the fund remains intact for future generations. I well understand that the mechanics of this will pose challenges; we're going to have to do some thinking, especially when it comes to bond issuance projects that have a gross receipts tax as the basis for its funding. But this isn't cold fusion, we can do it.

This is not raiding the fund. This is using it exactly as intended — for a rainy day.

And let me be clear: It is raining cats and dogs.

What happens when we finally shed this toxic tax system? Businesses will come. Jobs will follow. The medical industry will begin to flourish. With prosperity comes greater employment, more revenue and the resources to fund treatment centers, police officers and the infrastructure that reduces crime. Our young people might finally see a reason to stay and build their futures here, in the land their families have called home for generations.

Education remains a more complex challenge — our funding levels should already produce far better outcomes than they do. But fixing our tax system is the foundation upon which every other reform must be built.

So rather than sitting around saying "woe is me, we have a horrible tax system we can never escape," I ask my fellow New Mexicans to open your eyes. Be grateful for the incredible revenues that have built a Severance Tax Permanent Fund capable of liberating us from this burden. If that fund was built for a rainy day, today is that day.

I intend to build a platform where New Mexicans can engage with this proposal, share their ideas and add their voices to this cause. But most importantly, I ask this Legislature, this governor, to do something truly worthwhile: Turn this state around by instituting a fair, broad-based tax system that no longer punishes our poorest citizens.

Once and for all.

William J. Waggoner is an attorney and president of Mexico Petroleum Company. His grandfather, John Trigg, was among the wildcatters who discovered the Delaware Basin.