The State of New Mexico loses an estimated $80 million a year in revenues through a loophole that allows multistate corporations operating in the state to avoid corporate income tax. Moreover, as much as $5 billion is subtracted from potential state revenues through what are known as “tax expenditures” — tax deductions, exemptions, and credits that have been passed into law over the years.
That’s a staggering amount for a state with a $5.5 billion operating budget. Much of this tax burden is shifted onto the backs of workaday New Mexicans.
According to Bradley:
The tax expenditures themselves are not necessarily a problem. They can be useful in achieving good public policies — such as keeping physicians or encouraging economic development.
The problem is that we don’t know if they are actually achieving these public policies or if they are just giveaways.
This is not the case for the $5 billion-plus that the state spends every year via the operating budget. Every item in that budget must be justified every single year. If a program isn’t working the way it was supposed to, its funding can be cut. Not so for a tax expenditure that isn’t working.
New Mexico is one of just nine states that does not track the cost of tax expenditures…
And we wonder why we’re always behind other states when it comes to test scores, graduation rates, and poverty. Taking a closer look at who’s getting the big tax breaks and why would be two ways to begin to catch up.
For more outstanding research on New Mexico economic development and tax policies, check out the reports produced by NM Voices for Children.